Computer Modelling Group Announces Third Quarter Results

Computer Modelling Group Announces Third Quarter Results 
CALGARY, ALBERTA -- (Marketwired) -- 02/12/14 -- Computer Modelling
Group Ltd. (TSX:CMG) ("CMG" or the "Company") is very pleased to
report our third quarter results for the three and nine months ended
December 31, 2013. 


 
THIRD QUARTER HIGHLIGHTS                                                    
For the three months ended December 31,                                     
($ thousands, except per share data)         2013    2012 $ change % change 
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance software licenses      14,278  14,004      274        2%
Perpetual software licenses                 2,942   1,365    1,577      116%
Total revenue                              19,227  16,802    2,425       14%
Operating profit                            9,575   8,276    1,299       16%
Net income                                  7,205   6,119    1,086       18%
Earnings per share - basic                   0.19    0.16     0.03       19%
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands, except per share data)         2013    2012 $ change % change 
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance software licenses      41,389  39,196    2,193        6%
Perpetual software licenses                 7,102   6,106      996       16%
Total revenue                              54,527  49,341    5,186       11%
Operating profit                           27,221  24,413    2,808       12%
Net income                                 19,894  17,569    2,325       13%
Earnings per share - basic                   0.52    0.47     0.05       11%
----------------------------------------------------------------------------

 
MANAGEMENT'S DISCUSSION AND ANALYSIS 
This Management's Discussion and Analysis ("MD&A") for Computer
Modelling Group Ltd. ("CMG," the "Company," "we" or "our"), presented
as at February 11, 2014, should be read in conjunction with the
unaudited condensed consolidated financial statements and related
notes of the Company for the three and nine months ended December 31,
2013 and the audited consolidated financial statements and MD&A for
the years ended March 31, 2013 and 2012 contained in the 2013 Annual
Report for CMG. Additional information relating to CMG, including our
Annual Information Form, can be found at www.sedar.com. The financial
data contained herein have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and, unless
otherwise indicated, all amounts in this report are expressed in
Canadian dollars and rounded to the nearest thousand. 
FORWARD-LOOKING INFORMATION 
Certain information included in this MD&A is forward-looking.
Forward-looking information includes statements that are not
statements of historical fact and which address activities, events or
developments that the Company expects or anticipates will or may
occur in the future, including such things as investment objectives
and strategy, the development plans and status of the Company's
software development projects, the Company's intentions, results of
operations, levels of activity, future capital and other expenditures
(including the amount, nature and sources of funding thereof),
business prospects and opportunities, research and development
timetable, and future growth and performance. When used in this MD&A,
statements to the effect that the Company or its management
"believes", "expects", "expected", "plans", "may", "will",
"projects", "anticipates", "estimates", "would", "could", "should",
"endeavours", "seeks", "predicts" or "intends" or similar statements,
including "potential", "opportunity", "target" or other variations
thereof that are not statements of historical fact should be
construed as forward-looking information. These statements reflect
management's current beliefs with respect to future events and are
based on information currently available to management of the
Company. The Company believes that the expectations reflected in such
forward-looking information are reasonable, but no assurance can be
given that these expectations will prove to be correct and such
forward-looking information should not be unduly relied upon.  
With respect to forward-looking information contained in this MD&A,
we have made assumptions regarding, among other things: 


 
--  Future software license sales 
--  The continued financing by and participation of the Company's partners
    in the DRMS project and it being completed in a timely manner 
--  Ability to enter into additional software license agreements 
--  Ability to continue current research and new product development 
--  Ability to recruit and retain qualified staff 

 
Forward-looking information is not a guarantee of future performance
and involves a number of risks and uncertainties, only some of which
are described herein. Many factors could cause the Company's actual
results, performance or achievements, or future events or
developments, to differ materially from those expressed or implied by
the forward-looking information including, without limitation, the
following factors which are described in the MD&A of CMG's 2013
Annual Report under the heading "Business Risks": 


 
--  Economic conditions in the oil and gas industry 
--  Reliance on key clients 
--  Foreign exchange 
--  Economic and political risks in countries where the Company currently
    does or proposes to do business 
--  Increased competition 
--  Reliance on employees with specialized skills or knowledge 
--  Protection of proprietary rights 

 
Should one or more of these risks or uncertainties materialize, or
should assumptions underlying the forward-looking statements prove
incorrect, actual results, performance or achievement may vary
materially from those expressed or implied by the forward-looking
information contained in this MD&A. These factors should be carefully
considered and readers are cautioned not to place undue reliance on
forward-looking information, which speaks only as of the date of this
MD&A. All subsequent forward-looking information attributable to the
Company herein is expressly qualified in its entirety by the
cautionary statements contained in or referred to herein. The Company
does not undertake any obligation to release publicly any revisions
to forward-looking information contained in this MD&A to reflect
events or circumstances that occur after the date of this MD&A or to
reflect the occurrence of unanticipated events, except as may be
required under applicable securities laws. 
NON-IFRS FINANCIAL MEASURES 
This MD&A includes certain measures which have not been prepared in
accordance with IFRS such as "EBITDA", "direct employee costs" and
"other corporate costs." Since these measures do not have a standard
meaning prescribed by IFRS, they are unlikely to be comparable to
similar measures presented by other issuers. Management believes that
these indicators nevertheless provide useful measures in evaluating
the Company's performance.  
"Direct employee costs" include salaries, bonuses, stock-based
compensation, benefits, commission expenses, and professional
development. "Other corporate costs" include facility-related
expenses, corporate reporting, professional services, marketing and
promotion, computer expenses, travel, and other office-related
expenses. Direct employee costs and other corporate costs should not
be considered an alternative to total operating expenses as
determined in accordance with IFRS. People-related costs represent
the Company's largest area of expenditure; hence, management
considers highlighting separately corporate and people-related costs
to be important in evaluating the quantitative impact of cost
management of these two major expenditure pools. See "Expenses"
heading for a reconciliation of direct employee costs and other
corporate costs to total operating expenses.  
"EBITDA" refers to net income before adjusting for depreciation
expense, finance income, finance costs, and income and other taxes.
EBITDA should not be construed as an alternative to net income as
determined by IFRS. The Company believes that EBITDA is useful
supplemental information as it provides an indication of the results
generated by the Company's main business activities prior to
consideration of how those activities are amortized, financed or
taxed. See "EBITDA" heading for a reconciliation of EBITDA to net
income. 
CORPORATE PROFILE 
CMG is a computer software technology company serving the oil and gas
industry. The Company is a leading supplier of advanced processes
reservoir modelling software with a blue chip client base of
international oil companies and technology centers in over 50
countries. The Company also provides professional services consisting
of highly specialized support, consulting, training, and contract
research activities. CMG has sales and technical support services
based in Calgary, Houston, London, Caracas, Dubai, Bogota and Kuala
Lumpur. CMG's Common Shares are listed on the Toronto Stock Exchange
("TSX") and trade under the symbol "CMG". 


 
QUARTERLY PERFORMANCE ($ thousands, unless otherwise stated)                
                                                                            
                     Fiscal                                                 
                    2012(1)       Fiscal 2013(2)           Fiscal 2014(3)   
                         Q4     Q1     Q2     Q3     Q4     Q1     Q2     Q3
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance                                                         
 licenses            12,497 13,179 12,012 14,004 15,359 13,958 13,153 14,278
Perpetual licenses    3,416  2,070  2,671  1,365  2,300  2,331  1,829  2,942
----------------------------------------------------------------------------
Software licenses    15,913 15,249 14,683 15,369 17,659 16,289 14,982 17,220
Professional                                                                
 services             1,302  1,216  1,390  1,433  1,620  1,827  2,202  2,007
----------------------------------------------------------------------------
Total revenue        17,215 16,465 16,073 16,802 19,279 18,116 17,184 19,227
Operating profit      9,193  8,105  8,032  8,276  9,877  9,350  8,296  9,575
Operating profit                                                            
 (%)                     53     49     50     49     51     52     48     50
EBITDA(4)             9,543  8,423  8,425  8,687 10,294  9,725  8,675  9,972
Profit before                                                               
 income and other                                                           
 taxes                9,104  8,577  7,703  8,556 10,314  9,999  8,133 10,249
Income and other                                                            
 taxes                2,484  2,487  2,342  2,437  3,061  2,918  2,525  3,044
Net income for the                                                          
 period               6,620  6,090  5,361  6,119  7,253  7,081  5,608  7,205
Cash dividends                                                              
 declared and paid    4,848  9,736  6,020  6,050  6,099  8,841  6,994  7,020
----------------------------------------------------------------------------
Per share amounts -                                                         
 ($/share)                                                                  
Earnings per share                                                          
 - basic               0.18   0.16   0.14   0.16   0.19   0.19   0.15   0.19
Earnings per share                                                          
 - diluted             0.17   0.16   0.14   0.16   0.19   0.18   0.14   0.18
Cash dividends                                                              
 declared and paid     0.13   0.26   0.16   0.16   0.16   0.23   0.18   0.18
----------------------------------------------------------------------------
(1)Q4 of fiscal 2012 includes $2.7 million in revenue that pertains to usage
   of CMG's products in prior quarters.                                     
(2)Q1, Q2, Q3 and Q4 of fiscal 2013 include $2.1 million, $0.2 million, $1.8
   million and $2.6 million, respectively, in revenue that pertains to usage
   of CMG's products in prior quarters.                                     
(3)Q1, Q2 and Q3 of fiscal 2014 include $1.2 million, $0.2 million and $0.9 
   million, respectively, in revenue that pertains to usage of CMG's        
   products in prior quarters.                                              
(4)EBITDA is defined as net income before adjusting for depreciation        
   expense, finance income, finance costs, and income and other taxes. See  
   "Non-IFRS Financial Measures".                                           

 
Highlights 
During the nine months ended December 31, 2013, as compared to the
same period of the prior fiscal year, CMG: 


 
--  Increased annuity/maintenance revenue by 6% 
--  Increased operating profit by 12% 
--  Increased spending on research and development by 18% 
--  Increased EBITDA by 11% 
--  Realized basic earnings per share of $0.52, representing a 11% increase 
 
Revenue                                                                     
                                                                            
For the three months ended December 31,                                     
($ thousands)                               2013    2012  $ change % change 
----------------------------------------------------------------------------
                                                                            
Software licenses                         17,220  15,369     1,851       12%
Professional services                      2,007   1,433       574       40%
----------------------------------------------------------------------------
Total revenue                             19,227  16,802     2,425       14%
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of total                                       
 revenue                                      90%     91%                   
Professional services - % of total                                          
 revenue                                      10%      9%  
                 
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                               2013    2012  $ change % change 
----------------------------------------------------------------------------
                                                                            
Software licenses                         48,491  45,302     3,189        7%
Professional services                      6,036   4,039     1,997       49%
----------------------------------------------------------------------------
Total revenue                             54,527  49,341     5,186       11%
----------------------------------------------------------------------------
                                                                            
Software license revenue - % of total                                       
 revenue                                      89%     92%                   
Professional services - % of total                                          
 revenue                                      11%      8%                   
----------------------------------------------------------------------------

 
CMG's revenue is comprised of software license sales, which provide
the majority of the Company's revenue, and fees for professional
services. 
Total revenue increased by 14% for the three months ended December
31, 2013, compared to the same period of the previous fiscal year,
due to increases in both software license revenue and professional
services. 
Similarly, total revenue increased by 11% for the nine months ended
December 31, 2013, compared to the same period of the previous fiscal
year, as a result of increases in both software license revenue and
professional services.  
SOFTWARE LICENSE REVENUE  
Software license revenue is made up of annuity/maintenance license
fees charged for the use of the Company's software products which is
generally for a term of one year or less and perpetual software
license sales, whereby the customer purchases the current version of
the software and has the right to use that version in perpetuity.
Annuity/maintenance license fees have historically had a high renewal
rate and, accordingly, provide a reliable revenue stream while
perpetual license sales are more variable and unpredictable in nature
as the purchase decision and its timing fluctuate with the customers'
needs and budgets. The majority of CMG's customers who have acquired
perpetual software licenses subsequently purchase our maintenance
package to ensure ongoing product support and access to current
versions of CMG's software. 


 
For the three months ended December 31,                                     
($ thousands)                               2013    2012  $ change % change 
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses              14,278  14,004       274        2%
Perpetual licenses                         2,942   1,365     1,577      116%
----------------------------------------------------------------------------
Total software license revenue            17,220  15,369     1,851       12%
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                     83%     91%                   
Perpetual as a % of total software                                          
 license revenue                              17%      9%                   
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                               2013    2012  $ change % change 
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance licenses              41,389  39,196     2,193        6%
Perpetual licenses                         7,102   6,106       996       16%
----------------------------------------------------------------------------
Total software license revenue            48,491  45,302     3,189        7%
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance as a % of total                                         
 software license revenue                     85%     87%                   
Perpetual as a % of total software                                          
 license revenue                              15%     13%                   
----------------------------------------------------------------------------

 
Total software license revenue grew by 12% in the three months ended
December 31, 2013, compared to the same period of the previous fiscal
year, mainly due to an increase in perpetual license sales. Total
software license revenue grew by 7% in the nine months ended December
31, 2013, compared to the same period of the previous fiscal year,
due to increases in both the annuity/maintenance and perpetual
license sales.  
CMG's annuity/maintenance license revenue increased by 2% and 6%
during the three and nine months ended December 31, 2013,
respectively, compared to the same periods of the previous year. This
increase was driven by annuity sales to new and existing customers as
well as an increase in maintenance revenue tied to perpetual sales.
In addition, annuity/maintenance license revenue for the three and
nine months ended December 31, 2013, compared to the same periods of
the previous year, was positively affected by the weakening of the
Canadian dollar. 
All of our regions, except South America, experienced growth in
annuity/maintenance revenue during the three and nine months ended
December 31, 2013, compared to the same periods of the previous year,
with the most significant growth being generated from the US market. 
Our annuity/maintenance revenue is impacted by the revenue
recognition from a long-standing customer for which revenue
recognition criteria are fulfilled only at the time of the receipt of
funds (see the discussion about revenue earned in the current period
that pertains to usage of products in prior quarters above the
"Quarterly Software License Revenue" graph). The variability of the
amounts of the payments received and the timing of such payments may
skew the comparison of the recorded annuity/maintenance revenue
amounts between periods. During the current quarter no payments have
been received or recorded for this arrangement. To provide a
normalized comparison, if we were to remove revenue from this
particular customer from the third quarter of the previous year, we
will notice that the annuity/maintenance revenue increased by 11%,
instead of 2%, as compared to the same period of the previous year.
Similarly, if we were to remove revenue from this particular customer
from the year-to-date recorded revenue, we will notice that the
annuity/maintenance revenue increased by 12%, instead of 6%, as
compared to the same period of the previous year. Given our long-term
relationship with this customer, and their on-going use of our
licenses, we expect to continue to receive payments from them;
however, the amount and timing are uncertain and will continue to be
recorded on a cash basis, which may introduce some variability in our
reported quarterly annuity/maintenance revenue results. 
Perpetual license sales increased by 116% for the three months ended
December 31, 2013, compared to the same period of the prev
ious fiscal
year, due to increases in the US, South America and Eastern
Hemisphere. 
Perpetual license sales increased by 16% for the nine months ended
December 31, 2013, compared to the same period of the previous fiscal
year, due to growth in perpetual sales generated by the US, South
America and Eastern Hemisphere offset by a decrease in Canada. 
Software licensing under perpetual sales is a significant part of
CMG's business, but may fluctuate significantly between periods due
to the uncertainty associated with the timing and the location where
sales are generated. For this reason, even though we expect to
achieve a certain level of aggregate perpetual sales on an annual
basis, we expect to observe fluctuations in the quarterly perpetual
revenue amounts throughout the fiscal year.  
We can observe from the table below that the exchange rates between
the US and Canadian dollars during the three and nine months ended
December 31, 2013, compared to the same periods of the previous
fiscal year, had a positive impact on our reported license revenue. 
The following table summarizes the US dollar denominated revenue and
the weighted average exchange rate at which it was converted to
Canadian dollars:  


 
For the three months ended December                                         
 31,                                                                        
($ thousands)                                 2013   2012 $ change % change 
----------------------------------------------------------------------------
                                                                            
US dollar annuity/maintenance license                                       
 sales                                 US$   9,460  8,785      675        8%
Weighted average conversion rate             1.022  1.001                   
----------------------------------------------------------------------------
Canadian dollar equivalent             CDN$  9,671  8,795      876       10%
----------------------------------------------------------------------------
                                                                            
US dollar perpetual license sales      US$   2,665    908    1,757      194%
Weighted average conversion rate             1.045  0.994                   
----------------------------------------------------------------------------
Canadian dollar equivalent             CDN$  2,786    903    1,883      209%
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,        2013   2012 $ change % change 
($ thousands)                                                               
----------------------------------------------------------------------------
                                                                            
US dollar annuity/maintenance license                                       
 sales                                 US$  27,568 24,361    3,207       13%
Weighted average conversion rate             1.014  1.001                   
----------------------------------------------------------------------------
Canadian dollar equivalent             CDN$ 27,966 24,393    3,573       15%
----------------------------------------------------------------------------
                                                                            
US dollar perpetual license sales      US$   6,426  4,159    2,267       55%
Weighted average conversion rate             1.036  1.000                   
----------------------------------------------------------------------------
Canadian dollar equivalent             CDN$  6,655  4,160    2,495       60%
----------------------------------------------------------------------------
                                                                            
The following table quantifies the foreign exchange impact on our software  
license revenue:                                                            
                                                                            
For the three months ended                      Incremental  Foreign        
December 31, 2013                       Q3 2013     License Exchange Q3 2014
($ thousands)                           Balance      Growth   Impact Balance
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance license sales        14,004          74      200  14,278
Perpetual license sales                   1,365       1,442      135   2,942
----------------------------------------------------------------------------
Total software license revenue           15,369       1,516      335  17,220
----------------------------------------------------------------------------
                                                                            
For the nine months ended                       Incremental  Foreign        
December 31, 2013                       Q3 2013     License Exchange Q3 2014
($ thousands)                           Balance      Growth   Impact Balance
----------------------------------------------------------------------------
                                                                            
Annuity/maintenance license sales        39,196       1,832      361  41,389
Perpetual license sales                   6,106         769      227   7,102
----------------------------------------------------------------------------
Total software license revenue           45,302       2,601      588  48,491
----------------------------------------------------------------------------
 

 
                                                                            
REVENUE BY GEOGRAPHIC SEGMENT                                               
                                                                            
For the three months ended December 31,                                     
($ thousands)                                2013   2012 $ change  % change 
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                                    6,013  5,490      523        10%
  United States                             3,421  2,818      603        21%
  South America                             1,513  2,435     (922)      -38%
  Eastern Hemisphere(1)                     3,331  3,261       70         2%
----------------------------------------------------------------------------
                                           14,278 14,004      274         2%
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                      156    227      (71)      -31%
  United States                               427      -      427       100%
  South America                               862     26      836      3215%
  Eastern Hemisphere                        1,497  1,112      385        35%
----------------------------------------------------------------------------
                                            2,942  1,365    1,577       116%
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                                    6,169  5,717      452         8%
  United States                             3,848  2,818    1,030        37%
  South America                             2,375  2,461      (86)       -3%
  Eastern Hemisphere                        4,828  4,373      455        10%
----------------------------------------------------------------------------
                                           17,220 15,369    1,851        12%
---------------------------------------------------------------
-------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                                2013   2012 $ change  % change 
----------------------------------------------------------------------------
Annuity/maintenance revenue                                                 
  Canada                                   16,895 15,902      993         6%
  United States                             9,542  7,759    1,783        23%
  South America                             5,411  6,770   (1,359)      -20%
  Eastern Hemisphere(1)                     9,541  8,765      776         9%
----------------------------------------------------------------------------
                                           41,389 39,196    2,193         6%
----------------------------------------------------------------------------
Perpetual revenue                                                           
  Canada                                      447  1,541   (1,094)      -71%
  United States                               854    662      192        29%
  South America                             1,352    509      843       166%
  Eastern Hemisphere                        4,449  3,394    1,055        31%
----------------------------------------------------------------------------
                                            7,102  6,106      996        16%
----------------------------------------------------------------------------
Total software license revenue                                              
  Canada                                   17,342 17,443     (101)       -1%
  United States                            10,396  8,421    1,975        23%
  South America                             6,763  7,279     (516)       -7%
  Eastern Hemisphere                       13,990 12,159    1,831        15%
----------------------------------------------------------------------------
                                           48,491 45,302    3,189         7%
----------------------------------------------------------------------------
(1)Includes Europe, Africa, Asia and Australia.                             

 
During the three months ended December 31, 2013, on a geographic
basis, total software license sales increased across all regions with
the exception of the South American market which experienced an
overall decrease of 3%, compared to the same period of the previous
fiscal year. 
During the nine months ended December 31, 2013, on a geographic
basis, total software license sales increased by 23% and 15% in the
US and Eastern Hemisphere, respectively, while Canada and South
America experienced decreases of 1% and 7%, respectively.  
The Canadian market (representing 36% of year-to-date total software
revenue) experienced growth in annuity/maintenance revenue during the
three and nine months ended December 31, 2013, compared to the same
periods of the previous fiscal year. These increases were supported
by sales to both new and existing customers. Perpetual sales were
lower during the three and nine months ended December 31, 2013,
compared to the same periods of the previous year, due to the
fluctuations inherent in the perpetual revenue stream. Historically,
the Canadian market has been strong in generating recurring
annuity/maintenance revenue as evidenced by the quarterly
year-over-year increases of 37%, 38%, and 10% recorded during Q3
2013, Q4 2013 and Q1 2014, respectively. Annuity/maintenance was
relatively flat in Q2 2014, compared to the same period of the
previous fiscal year; however, the double digit growth trend returned
in the third quarter of the current fiscal year with the recorded
increase of 10%. 
The US market (representing 21% of year-to-date total software
revenue) experienced significant growth in annuity/maintenance
license sales, in comparison to other regions, during the three and
nine months ended December 31, 2013, compared to the same periods of
the previous fiscal year, driven by sales to new and existing
customers. Perpetual license sales increased during the three and
nine months ended December 31, 2013, compared to the same periods of
the previous year. We continue to experience successive increases in
the annuity/maintenance license sales in the US as evidenced by the
quarterly year-over-year increases of 32%, 20%, 32% and 16% recorded
during Q3 2013, Q4 2013, Q1 2014, and Q2 2014 respectively. This
double-digit growth trend has continued into the third quarter of the
current fiscal year with the recorded increase of 21%.  
South America (representing 14% of year-to-date total software
revenue) experienced a decline of 38% and 20% in annuity/maintenance
license sales during the three and nine months ended December 31,
2013, respectively, compared to the same periods of the previous
fiscal year. These decreases were caused by the variability of the
amounts recorded from a customer for which revenue is recognized only
when cash is received (see the discussion about revenue earned in the
current period that pertains to usage of products in prior quarters
above the "Quarterly Software License Revenue" graph). To provide a
normalized comparison, if we were to remove revenue from this
particular customer from the third quarter of the previous year, we
will notice that the South America annuity/maintenance revenue
increased by 20%, instead of a decrease of 38%, as compared to the
same period of the previous year. Similarly, if we were to remove
revenue from this particular customer from the year-to-date recorded
revenue, we will notice that the South America annuity/maintenance
revenue increased by 18%, instead of a decrease of 20%, as compared
to the same period of the previous year. The South American region
experienced increases in perpetual license sales during the three and
nine months ended December 31, 2013, compared to the same period of
the previous year.  
Eastern Hemisphere (representing 29% of the year-to-date total
software revenue) grew annuity/maintenance license sales by 2% and 9%
during the three and nine months ended December 31, 2013,
respectively, compared to the same periods of the previous fiscal
year, due to sales to both new and existing customers in the region.
Compared to other regions, the Eastern Hemisphere achieved the
highest dollar value of growth in perpetual license revenue during
the nine months ended December 31, 2013, compared to the same period
of the previous year.  
Movements in perpetual sales across regions are indicative of the
unpredictable nature of the timing and location of perpetual license
sales. Overall, our recurring annuity/maintenance revenue base
continues to experience growth. We will continue to focus our efforts
on increasing our license sales to both existing and new customers,
and we will endeavor to continue expanding our market share globally. 
As footnoted in the Quarterly Performance table, in the normal course
of business, CMG may complete the negotiation of certain
annuity/maintenance contracts and/or fulfill revenue recognition
requirements within a current quarter that includes usage of CMG's
products in prior quarters. This situation particularly affects
contracts negotiated with countries that face increased economic and
political risks leading to revenue recognition criteria being
satisfied only at the time of the receipt of cash. The dollar
magnitude of such contracts may be significant to the quarterly
comparatives of our annuity/maintenance revenue stream and, to
provide a normalized comparison, we specifically identify the revenue
component where revenue recognition is satisfied in the current
period for products provided in previous quarters. 
To view a chart of the Quarterly Software License Revenue, please
visit the following link:
http://media3.marketwire.com/docs/926056g.pdf  


 
DEFERRED REVENUE                                                            
                                       
                                     
($ thousands)                                 2013   2012 $ change % change 
----------------------------------------------------------------------------
Deferred revenue at:                                                        
March 31                                    25,289 21,693    3,596       17%
June 30                                     22,014 18,779    3,235       17%
September 30                                19,346 18,241    1,105        6%
December 31                                 18,069 15,510    2,559       16%
----------------------------------------------------------------------------

 
CMG's deferred revenue consists primarily of amounts for pre-sold
licenses. Our annuity/maintenance revenue is deferred and recognized
on a straight-line basis over the life of the related license period,
which is generally one year or less. Amounts are deferred for
licenses that have been provided and revenue recognition reflects the
passage of time.  
The increase in deferred revenue year-over-year as at December 31,
September 30, June 30 and March 31 is reflective of the growth in
annuity/maintenance license sales. The variation within the year is
due to the timing of renewals of annuity and maintenance contracts
that are skewed to the beginning of the calendar year which explains
the decrease in deferred revenue balance at the end of the first
quarter, second quarter and third quarter (June 30, September 30 and
December 31, respectively) compared to the fiscal year-end (March
31). Deferred revenue at December 31, 2013 increased compared to the
same period of the prior fiscal year due to both the renewal of
existing and signing of new annuity and maintenance contracts in the
quarter.  
PROFESSIONAL SERVICES REVENUE  
CMG recorded professional services revenue of $2.0 million for the
three months ended December 31, 2013, representing an increase of
$0.6 million, compared to the same period of the previous fiscal
year, due to both an increase in project activities by our clients
and due to entering into a large consulting agreement with one of our
clients which, we expect, will continue to contribute to the
professional services revenue during the current fiscal year.
Professional services for the nine months ended December 31, 2013
amounted to $6.0 million, representing an increase of $2.0 million,
compared to the same period of the previous fiscal year, which again
resulted from entering into a large consulting agreement with one of
our clients in the current fiscal year. 
Professional services revenue consists of specialized consulting,
training, and contract research activities. CMG performs consulting
and contract research activities on an ongoing basis, but such
activities are not considered to be a core part of our business and
are primarily undertaken to increase our knowledge base and hence
expand the technological abilities of our simulators in a funded
manner, combined with servicing our customers' needs. In addition,
these activities are undertaken to market the capabilities of our
suite of software products with the ultimate objective to increase
software license sales. Our experience is that consulting activities
are variable in nature as both the timing and dollar magnitude of
work are dependent on activities and budgets within client companies. 


 
Expenses                                                                    
                                                                            
For the three months ended December 31,                                     
($ thousands)                                 2013   2012 $ change % change 
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional services   4,119  3,778      341        9%
Research and development                     3,816  3,136      680       22%
General and administrative                   1,717  1,612      105        7%
----------------------------------------------------------------------------
Total operating expenses                     9,652  8,526    1,126       13%
----------------------------------------------------------------------------
                                                                            
Direct employee costs(1)                     7,599  6,716      883       13%
Other corporate costs                        2,053  1,810      243       13%
----------------------------------------------------------------------------
                                             9,652  8,526    1,126       13%
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                                 2013   2012 $ change % change 
----------------------------------------------------------------------------
                                                                            
Sales, marketing and professional services  11,605 11,333      272        2%
Research and development                    10,706  9,061    1,645       18%
General and administrative                   4,995  4,534      461       10%
----------------------------------------------------------------------------
Total operating expenses                    27,306 24,928    2,378       10%
----------------------------------------------------------------------------
                                                                            
Direct employee costs(1)                    21,907 19,802    2,105       11%
Other corporate costs                        5,399  5,126      273        5%
----------------------------------------------------------------------------
                                            27,306 24,928    2,378       10%
----------------------------------------------------------------------------
(1)Includes salaries, bonuses, stock-based compensation, benefits and       
   commissions.                                                             

 
CMG's total operating expenses increased by 13% and 10% for the three
and nine months ended December 31, 2013, respectively, compared to
the same periods of the previous fiscal year, due to increases in
both direct employee costs and other corporate costs.  
DIRECT EMPLOYEE COSTS  
As a technology company, CMG's largest area of expenditure is for its
people. Approximately 80% of the total operating expenses in the nine
months ended December 31, 2013 related to staff costs, compared to
79% recorded in the comparative period of last year. Staffing levels
for the current fiscal year grew in comparison to the previous fiscal
year to support our continued growth. At December 31, 2013, CMG's
staff complement was 189 employees and consultants, up from 166
employees as at December 31, 2012. Direct employee costs increased
during the three and nine months ended December 31, 2013, compared to
the same periods of the previous fiscal year, due to staff additions,
increased levels of compensation, and related benefits.  
OTHER CORPORATE COSTS  
Other corporate costs increased by 13% for the three months ended
December 31, 2013, compared to the same period of the previous fiscal
year, mainly due to the decrease in the Federal research and
experimental development ("SR&ED") input tax credit rate.  
Other corporate costs were comparable between the nine months ended
December 31, 2013 and 2012 with only a slight increase of 5%, mainly
due to increased computing costs offset by the inclusion of the costs
associated with CMG's biennial technical symposium in the nine months
ended December 31, 2012.  


 
RESEARCH AND DEVELOPMENT                                                    
                                                                            
For the three months ended December 31,                    
                 
($ thousands)                              2013     2012  $ change % change 
----------------------------------------------------------------------------
                                                                            
Research and development (gross)          4,125    3,586       539       15%
SR&ED credits                              (309)    (450)      141      -31%
----------------------------------------------------------------------------
Research and development                  3,816    3,136       680       22%
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                               20%      19%                   
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                              2013     2012  $ change % change 
----------------------------------------------------------------------------
                                                                            
Research and development (gross)         12,080   10,458     1,622       16%
SR&ED credits                            (1,374)  (1,397)       23       -2%
----------------------------------------------------------------------------
Research and development                 10,706    9,061     1,645       18%
----------------------------------------------------------------------------
                                                                            
Research and development as a % of                                          
 total revenue                               20%      18%                   
----------------------------------------------------------------------------

 
CMG maintains its belief that its strategy of growing long-term value
for shareholders can only be achieved through continued investment in
research and development. CMG works closely with its customers to
provide solutions to complex problems related to proven and new
advanced recovery processes.  
The above research and development costs include CMG's share of joint
research and development costs associated with the DRMS project of
$0.9 million and $3.0 million for the three and nine months ended
December 31, 2013, respectively (2012 - $1.0 million and $2.8
million). See discussion under "Commitments, Off Balance Sheet Items
and Transactions with Related Parties." 
The increases of 15% and 16% in our gross spending on research and
development for the three and nine months ended December 31, 2013,
respectively, compared to the same periods of the previous fiscal
year, demonstrate our continued commitment to advancement of our
technology which is the focal part of our business strategy. 
Research and development costs, net of research and experimental
development ("SR&ED") credits, increased by 22% and 18% during the
three and nine months ended December 31, 2013, respectively, compared
to the same periods of the previous fiscal year, due to increased
employee compensation costs and costs associated with computing
resources.  
We also had a decrease in SR&ED credits in the three and nine months
ended December 31, 2013, compared to the same period of the previous
fiscal year, driven by the decrease in the Federal SR&ED input tax
credit rate from 20% to 15% effective January 1, 2014 lowering our
average rate for fiscal 2014.  


 
DEPRECIATION                                                                
                                                                            
For the three months ended December 31,                                     
($ thousands)                                 2013  2012 $ change  % change 
----------------------------------------------------------------------------
                                                                            
Depreciation of property and equipment,                                     
 allocated to:                                                              
  Sales, marketing and professional services   102   124      (22)      -18%
  Research and development                     240   235        5         2%
  General and administrative                    55    52        3         6%
----------------------------------------------------------------------------
Total depreciation                             397   411      (14)       -3%
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                                 2013  2012 $ change  % change 
----------------------------------------------------------------------------
                                                                            
Depreciation of property and equipment,                                     
 allocated to:                                                              
  Sales, marketing and professional services   305   341      (36)      -11%
  Research and development                     692   641       51         8%
  General and administrative                   154   140       14        10%
----------------------------------------------------------------------------
Total depreciation                           1,151 1,122       29         3%
----------------------------------------------------------------------------
                                                                            
Depreciation in the three and nine months ended December 31, 2013 was       
relatively flat as compared to the same periods in the previous fiscal year.
                                                                            
Finance Income                                                              
                                                                            
For the three months ended December 31,                                     
($ thousands)                                  2013  2012 $ change % change 
----------------------------------------------------------------------------
                                                                            
Interest income                                 160   133       27       20%
Net foreign exchange gain                       514   147      367      250%
----------------------------------------------------------------------------
Total finance income                            674   280      394      141%
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                                  2013  2012 $ change % change 
----------------------------------------------------------------------------
                                                                            
Interest income                                 479   409       70       17%
Net foreign exchange gain                       681    13      668     5138%
----------------------------------------------------------------------------
Total finance income                          1,160   422      738      175%
----------------------------------------------------------------------------

 
Interest income increased in the three and nine months ended December
31, 2013, compared to the same periods of the prior fiscal year,
mainly due to investing larger cash balances. 
CMG is impacted by the movement of the US dollar against the Canadian
dollar as approximately 71% (2012 - 67%) of CMG's revenue for the
nine months ended December 31, 2013 is denominated in US do
llars,
whereas only approximately 25% (2012 - 22%) of CMG's total costs are
denominated in US dollars. 


 
                         At              At              At       Nine month
CDN$ to US$         June 30    September 30     December 31 trailing average
----------------------------------------------------------------------------
                                                                            
2011                 1.0370          0.9626          0.9833           1.0132
2012                 0.9813          1.0166          1.0051           0.9998
2013                 0.9513          0.9723          0.9402           0.9604
----------------------------------------------------------------------------

 
CMG recorded net foreign exchange gains of $0.5 million and $0.7
million for the three and nine months ended December 31, 2013,
respectively, compared to net foreign exchange gains of $0.1 million
and $0.01 million recorded in the three and nine months ended
December 31, 2012, respectively. These gains were a result of a
weakening in the Canadian dollar which contributed positively to the
valuation of our US-denominated working capital. 
Income and Other Taxes  
CMG's effective tax rate for the nine months ended December 31, 2013
is reflected as 29.90% (2012 - 29.26%), whereas the prevailing
Canadian statutory tax rate is now 25.0%. This difference is
primarily due to a combination of the non-tax deductibility of
stock-based compensation expense and the benefit of foreign
withholding taxes being realized only as a tax deduction as opposed
to a tax credit. 
The benefit recorded in CMG's books on the SR&ED investment tax
credit program impacts deferred income taxes. The investment tax
credit earned in the current fiscal year is utilized by CMG to reduce
income taxes otherwise payable for the current fiscal year and the
federal portion of this benefit bears an inherent tax liability as
the amount of the credit is included in the subsequent year's taxable
income for both federal and provincial purposes. The inherent tax
liability on these investment tax credits is reflected in the year
the credit is earned as a non-current deferred tax liability and
then, in the following fiscal year, is transferred to income taxes
payable. 


 
Operating Profit and Net Income                                             
                                                                            
For the three months ended                                                  
December 31,                                                                
($ thousands, except per share                                              
 amounts)                                 2013     2012  $ change  % change 
----------------------------------------------------------------------------
                                                                            
Total revenue                           19,227   16,802     2,425        14%
Operating expenses                      (9,652)  (8,526)   (1,126)       13%
----------------------------------------------------------------------------
                                                                            
Operating profit                         9,575    8,276     1,299        16%
                                                                            
Operating profit as a % of total                                            
 revenue                                    50%      49%                    
----------------------------------------------------------------------------
                                                                            
Net income for the period                7,205    6,119     1,086        18%
                                                                            
Net income for the period as a % of                                         
 total revenue                              37%      36%                    
----------------------------------------------------------------------------
                                                                            
Basic earnings per share ($/share)        0.19     0.16      0.03        19%
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands, except per share                                              
amounts)                                  2013     2012  $ change  % change 
----------------------------------------------------------------------------
                                                                            
Total revenue                           54,527   49,341     5,186        11%
Operating expenses                     (27,306) (24,928)   (2,378)       10%
----------------------------------------------------------------------------
                                                                            
Operating profit                        27,221   24,413     2,808        12%
                                                                            
Operating profit as a % of total                                            
 revenue                                    50%      49%                    
----------------------------------------------------------------------------
                                                                            
Net income for the period               19,894   17,569     2,325        13%
                                                                            
Net income for the period as a % of                                         
 total revenue                              36%      36%                    
----------------------------------------------------------------------------
                                                                            
Earnings per share ($/share)              0.52     0.47      0.05        11%
----------------------------------------------------------------------------

 
Operating profit as a percentage of total revenue for the three and
nine months ended December 31, 2013 was at 50% compared to 49%
recorded in the same periods of the previous fiscal year. While our
total revenue grew by 14% and 11% for the three and nine months ended
December 31, 2013, respectively, as compared to the same periods of
the previous fiscal year, our operating expenses grew by only 13% and
10%, respectively, having a positive impact on our operating profit.
Our high levels of operating profit as a percentage of revenue
demonstrate our commitment to continue to effectively manage our
costs. 
Net income for the period as a percentage of revenue increased to 37%
for the three months ended December 31, 2013, compared to 36% for the
same period of the previous fiscal year. 
Net income for the period as a percentage of revenue was consistent
at 36% for the nine months ended December 31, 2013, compared to the
same period of the previous fiscal year. 
We have continued to maintain our profitability by focusing our
efforts on increasing license sales while, at the same time,
effectively controlling our operating costs. Managing these variables
will continue to be imperative to our future success. 


 
EBITDA                                                                      
                                                                            
For the three months ended December 31,                                     
($ thousands)                              2013    2012  $ change  % change 
----------------------------------------------------------------------------
                                                                            
Net income for the period                 7,205   6,119     1,086        18%
Add (deduct):                                                               
  Depreciation                              397     411       (14)       -3%
 
 Finance income                           (674)   (280)     (394)      141%
  Income and other taxes                  3,044   2,437       607        25%
----------------------------------------------------------------------------
EBITDA                                    9,972   8,687     1,285        15%
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue               52%     52%                    
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                              2013    2012  $ change  % change 
----------------------------------------------------------------------------
                                                                            
Net income for the period                19,894  17,569     2,325        13%
Add (deduct):                                                               
  Depreciation                            1,151   1,122        29         3%
  Finance income                         (1,160)   (422)     (738)      175%
  Income and other taxes                  8,487   7,266     1,221        17%
----------------------------------------------------------------------------
EBITDA                                   28,372  25,535     2,837        11%
----------------------------------------------------------------------------
                                                                            
EBITDA as a % of total revenue               52%     52%                    
----------------------------------------------------------------------------

 
EBITDA increased by 15% and 11% for the three and nine months ended
December 31, 2013, compared to the same periods of the previous
fiscal year. This increase provides further indication of our ability
to keep growing our license sales while effectively managing costs.  
EBITDA as a percent of total revenue for the three and nine months
ended December 31, 2013 remained consistent at 52% as compared to the
same periods of the previous fiscal year.  


 
Liquidity and Capital Resources                                             
                                                                            
For the three months ended December 31,                                     
($ thousands)                             2013     2012  $ change  % change 
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period               63,745   50,694    13,051        26%
Cash flow from (used in):                                                   
  Operating activities                   6,724    6,720         4         0%
  Financing activities                  (5,545)  (4,777)     (768)       16%
  Investing activities                    (216)    (401)      185       -46%
----------------------------------------------------------------------------
Cash, end of period                     64,708   52,236    12,472        24%
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
($ thousands)                             2013     2012  $ change  % change 
----------------------------------------------------------------------------
                                                                            
Cash, beginning of period               59,419   55,374     4,045         7%
Cash flow from (used in):                                                   
  Operating activities                  19,464   16,918     2,546        15%
  Financing activities                 (13,706) (18,296)    4,590       -25%
  Investing activities                    (469)  (1,760)    1,291       -73%
----------------------------------------------------------------------------
Cash, end of period                     64,708   52,236    12,472        24%
----------------------------------------------------------------------------

 
OPERATING ACTIVITIES 
Cash flow generated from operating activities remained consistent in
the three months ended December 31, 2013, compared to the same period
of last year. 
Cash flow generated from operating activities increased by $2.5
million in the nine months ended December 31, 2013, compared to the
same period of last year, mainly due to the increase in net income
for the period and the positive effect on the timing difference of
when income taxes are recorded and paid offset by the timing
difference of when sales are made and when the resulting receivables
are collected and the change in the deferred revenue balance. 
FINANCING ACTIVITIES 
Cash used in financing activities during the three months ended
December 31, 2013 increased by $0.8 million, compared to the same
period of the previous fiscal year, as a result of paying larger
dividends.  
During the nine months ended December 31, 2013, cash used in
financing activities decreased by $4.6 million, compared to the same
period of the previous fiscal year, due to receiving higher proceeds
from the issuance of Common Shares offset by paying larger dividends.
In addition, in the first quarter of the previous fiscal year, CMG
spent $1.6 million on buying back Common Shares. 
During the nine months ended December 31, 2013, CMG employees and
directors exercised options to purchase 884,000 Common Shares, which
resulted in cash proceeds of $9.1 million (2012 - 601,000 options
exercised to purchase Common Shares which resulted in cash proceeds
of $5.1 million). 
In the nine months ended December 31, 2013, CMG paid $22.9 million in
dividends, representing the following quarterly dividends:  


 
($ per share)                                         Q1        Q2        Q3
----------------------------------------------------------------------------
                                                                            
Dividends declared and paid                         0.18      0.18      0.18
Special dividend declared and paid                  0.05         -         -
----------------------------------------------------------------------------
Total dividends declared and paid                   0.23      0.18      0.18
----------------------------------------------------------------------------

 
In the nine months December 31, 2012, CMG paid $21.8 million in
dividends, representing the following quarterly dividends: 


 
($ per share)                                         Q1        Q2        Q3
----------------------------------------------------------------------------
                                                                            
Dividends declared and paid                         0.16      0.16      0.16
Special dividend declared and paid                  0.10         -         -
----------------------------------------------------------------------------
Total dividends declared and paid                   0.26      0.16      0.16
----------------------------------------------------------------------------

 
On February 11, 2014 CMG announced the payment of a quarterly
dividend of $0.19 per share on CMG's Common Shares. The dividend will
be paid on March 14, 2014 to shareholders of record at the close of
business on March 7, 2014.  
Over the past 10 years, we have consistently raised our total annual
dividend and paid out a special dividend at the end of each fiscal
year as determined by our corporate performance. In recognition of
the importance of a more regular income stream to our shareholders,
as reported in fiscal 2012 Management's Discussion and Analysis, we
decided to increase the relative proportion of dividends paid
quarterly and lower the amount paid as a special annual dividend
beginning in fiscal 2013. The above table demonstrates this increase
in the regular quarterly dividend which amounted to $0.18 per share
in Q1, Q2 and Q3 of fiscal 2014 compared to $0.16 per share in Q1, Q2
and Q3 of fiscal 2013.  
Based on our expectation of solid profitability and cash-generating
ability driven by the predictability of our software revenue base and
effective management of costs, we are cautiously optimistic that the
company is well positioned for future growth which will enable us to
continue to pay quarterly dividends. 
On April 16, 2012, the Company announced a Normal Course Issuer Bid
("NCIB") commencing on April 18, 2012 to purchase for cancellation up
to 3,416,000 of its Common Shares. During the year ended March 31,
2013, a total of 91,000 Common Shares were purchased at market price
for a total cost of $1,551,000. 
On April 29, 2013, the Company announced a NCIB commencing on May 1,
2013 to purchase for cancellation up to 3,538,000 of its Common
Shares. During the nine months ended December 31, 2013, no Common
Shares were purchased. 
INVESTING ACTIVITIES 
CMG's current needs for capital asset investment relate to computer
equipment and office infrastructure costs, all of which will be
funded internally. During the nine months ended December 31, 2013,
CMG expended $0.5 million on property and equipment additions,
primarily composed of computing equipment. CMG has a capital budget
of $1.8 million for fiscal 2014.  
LIQUIDITY AND CAPITAL RESOURCES 
At December 31, 2013, CMG has $64.7 million in cash, no debt, and has
access to just over $0.8 million under a line of credit with its
principal banker. 
During the nine months ended December 31, 2013, 7,399,000 shares of
CMG's public float were traded on the TSX. As at December 31, 2013,
CMG's market capitalization based upon its December 31, 2013 closing
price of $26.61 was $1.0 billion. 
Commitments, Off Balance Sheet Items and Transactions with Related
Parties  
The Company is the operator of the DRMS research and development
project (the "DRMS Project"), a collaborative effort with its
partners Shell International Exploration and Production BV ("Shell")
and Petroleo Brasileiro S.A. ("Petrobras"), to jointly develop the
newest generation of reservoir and production system simulation
software. The project has been underway since 2006 and, with the
ongoing support of the participants, it is expected to continue until
ultimate delivery of the software. The Company's share of costs
associated with the project is estimated to be $5.5 million ($2.6
million net of overhead recoveries) for fiscal 2014. CMG plans to
continue funding its share of the project costs associated with the
development of the newest generation reservoir simulation software
system from internally generated cash flows. 
CMG has very little in the way of other ongoing material contractual
obligations other than for pre-sold licenses which are reflected as
deferred revenue on its statement of financial position, and
contractual obligations for office leases which are estimated as
follows: 2014 - $0.5 million; 2015 to 2016 - $2.0 million per year;
and 2017 - $1.0 million. 
Business Risks and Critical Accounting Estimates 
These remain unchanged from the factors detailed in CMG's 2013 Annual
Report. 
Changes in Accounting Policies  
Except as disclosed below, the accounting policies, presentation and
methods of computation remain unchanged from those detailed in CMG's
2013 Annual Report. The following new standards and interpretations
have been adopted as detailed below: 


 
--  IFRS 10 Consolidated Financial Statements
    Replaces the guidance in IAS 27 Consolidated and Separate Financial
    Statements and SIC-12 Consolidation - Special Purpose Entities, and
    provides a single model to be applied in the control analysis for all
    investees, including entities that currently are special purpose
    entities in the scope of SIC-12. The Company adopted IFRS 10 for the
    annual period beginning on April 1, 2013. The adoption of IFRS 10 did
    not have a material impact on the condensed consolidated interim
    financial statements.
      
--  IFRS 11 Joint Arrangements
    Under IFRS 11, joint arrangements are classified as either joint
    operations or joint ventures. IFRS 11 replaces the guidance in IAS 31
    Interest in Joint Ventures, and essentially carves out of previous
    jointly controlled entities, those arrangements which although
    structured through a separate vehicle, such separation is ineffective
    and the parties to the arrangement have rights to the assets and
    obligations for the liabilities and are accounted for as joint
    operations in a fashion consistent with jointly controlled
    assets/operations under IAS 31. In addition, under IFRS 11, joint
    ventures must now use the equity method of accounting. The Company
    adopted IFRS 11 for the annual period beginning on April 1, 2013. The
    adoption of IFRS 11 did not have a material impact on the condensed
    consolidated interim financial statements.
      
--  IFRS 12 Disclosure of Interests in Other Entities
    Contains the disclosure requirements for entities that have interests in
    subsidiaries, joint arrangements, associates and/or unconsolidated
    structured entities. The Company adopted IFRS 12 for the annual period
    beginning on April 1, 2013. The adoption of IFRS 12 did not have a
    material impact on the condensed consolidated interim financial
    statements.
      
--  IFRS 13 Fair Value Measurement
    Replaces the fair value measurement guidance contained in individual
    IFRSs with a single source of fair value measurement guidance. It
    defines fair value as the price that would be received to sell an asset
    or paid to transfer a liability in an orderly transaction between market
    participants at the measurement date, i.e. an exit price. The standard
    also establishes a framework for measuring fair value and sets out
    disclosure requirements for fair value measurement to provide
    information that enables financial statement users to assess the methods
    and inputs used to develop fair value measurements and, for recurring
    fair value measurements that use significant unobservable inputs (Level
    3), the effect of the measurements on profit or loss or other. The
    Company adopted IFRS 13 prospectively for the interim and annual periods
    beginning on April 1, 2013. The adoption of IFRS 13 did not have a
    material impact on the condensed consolidated interim financial
    statements other than the inclusion of certain fair value disclosures
    which were previously applicable to annual financial statements only.
      
--  Amendments to IAS 1 Presentation of Financial Statements
    Require an entity present separately the items of other comprehensive
    income that may be reclassified to profit or loss in the future from
    those that would never be reclassified to profit or loss. The Company
    adopted the amendments for the annual period beginning on April 1, 2013.
    As the amendments only required changes in the presentation of items in
    other comprehensive income, the new standard did not have a material
    impact on the condensed consolidated interim financial statements.
      
--  Amendments to IFRS 7 Offsetting Financial Assets and Liabilities
    Contains new disclosure requirements for offset financial assets and
    liabilities and netting arrangements. The Company adopted the amendments
    for the interim and annual periods beginning on April 1, 2013. The
    amendments to IFRS 7 did not have a material impact on the condensed
    consolidated interim financial statements. 

 
Accounting Standards and Interpretations Issued But Not Yet Effective 
The following standards and interpretations have not been adopted by
the Company as they apply to future periods: 


 
                          Nature of impending                               
                          change in accounting      Impact on CMG's         
Standard/Interpretation   policy                    financial statements    
----------------------------------------------------------------------------
                                                                            
IFRS 9 Financial          IFRS 9 (2009) replaces    The mandatory effective 
Instruments               the guidance in IAS 39    date of IFRS 9 (2010),  
                          Financial Instruments:    which supersedes IFRS 9 
In November 2009 the IASB Recognition and           (2009), has been left   
issued IFRS 9 Financial   Measurement, on the       open by the IASB. Early 
Instruments (IFRS 9       classification and        adoption is permitted.  
(2009)), and in October   measurement of financial  The Company will        
2010 the IASB published   assets. The Standard      determine when to adopt 
amendments to IFRS 9      eliminates the existing   IFRS 9 (2010) when the  
(IFRS 9 (2010)). On July  IAS 39 categories of held IASB has determined the 
24, 2013 the IASB         to maturity, available-   mandatory effective date
tentatively decided to    for-sale and loans and    and finalised the       
defer the mandatory       receivable.               impairment and          
effective date of IFRS 9.                           classification and      
The mandatory effective   Financial assets will be  measurement             
date will be left open    classified into one of    requirements.           
pending the finalisation  two categories on initial                         
of the impairment and     recognition:              The Company does not    
classification and                                  expect IFRS 9 (2010) to 
measurement requirements. - financial assets        have a material impact  
                          measured at amortized     on the financial        
                          cost; or                  statements. The         
                          - financial assets        classification and      
                          measured at fair value.   measurement of the      
                                                    Company's financial     
                          Gains and losses on       assets and liabilities  
                          remeasurement of          is not expected to      
                          financial assets measured change under IFRS 9     
                          at fair value will be     (2010) because of the   
                          recognized in profit or   nature of the Company's 
                          loss, except that for an  operations and the types
                          investment in an equity   of financial assets that
                          instrument which is not   it holds.               
                          held-for-trading, IFRS 9                          
                          provides, on initial                              
                          recognition, an                                   
                          irrevocable election to                           
                          present all fair value                            
                          changes from the                                  
                          investment in other                               
                          comprehensive income                              
                          (OCI). The election is                            
                          available on an                                   
                          individual share-by-share                         
                          basis. Amounts presented                          
                          in OCI will not be                                
                          reclassified to profit or                         
                          loss at a later date.                             
                                                                            
                          IFRS 9 (2010) added                               
                          guidance to IFRS 9 (2009)                         
                          on the classification and                         
                          measurement of financial                          
                          liabilities, and this                             
                          guidance is consistent                            
                          with the guidance in IAS                          
                          39 expect as described                            
                          below.                                            
                                                                            
                          Under IFRS 9 (2010), for                          
                          financial liabilities                             
                          measured at fair value                            
                          under the fair value                              
                          option, changes in fair                           
                          value attributable to                             
                          changes in credit risk                            
                          will be recognized in                             
                          OCI, with the remainder                           
                          of the change recognized                          
                          in profit or loss.                                
                          However, if this                                  
                          requirement creates or                            
                          enlarges an accounting                            
                          mismatch in profit or                             
                          loss, the entire change                           
                          in fair value will be                             
                          recognized in profit or                           
                          loss. Amounts presented                           
                          in OCI will not be                                
                          reclassified to profit or                         
                          loss at a later date.                             
                                                                            
                          IFRS 9 (2010) also                                
                          requires derivative                               
                          liabilities that are                              
                          linked to and must be                             
                          settled by delivery of an                         
                          unquoted equity                                   
                          instrument to be measured                         
                          at fair value, whereas                            
                          such derivative                                   
                          liabilities are measured                          
                          at cost under IAS 39.                             
                          IFRS 9 (2010) also added                          
                          the requirements of IAS                           
                          39 for the derecognition                          
                          of financial assets and                           
                          liabilities to IFRS 9                             
                          without change.                                   
                                                                            
----------------------------------------------------------------------------
                                                                            
Amendments to IAS 32,     The amendments to IAS 32  The Company intends to  
Offsetting Financial      clarify that an entity    adopt the amendments to 
Assets and Liabilities    currently has a legally   IAS 32 in its financial 
                          enforceable right to set- statements for the      
In December 2011, the     off if that right is:     annual period beginning 
IASB published Offsetting                           April 1, 2014. The      
Financial Assets and      - not contingent on a     Company does not expect 
Financial Liabilities and future event; and         the amendments to have a
issued new presentation   - enforceable both in the material impact on the  
requirements in IAS 32    normal course of business financial statements.   
Financial Instruments:    and in the event of                               
Presentation.             default, insolvency or                            
                          bankruptcy of the entity                          
The effective date for    and all counterparties.                           
the amendments to IAS 32                                                    
is annual periods         The amendments to IAS 32                          
beginning on or after     also clarify when a                               
January 1, 2014. These    settlement mechanism                              
amendments are to be      provides for net                                  
applied retrospectively.  settlement or gross                               
                          settlement that is                                
                          equivalent to net                                 
                          settlement.                                       
                                                                            
----------------------------------------------------------------------------
                                                                            
Amendments to IAS 36,     The amendments to IAS 36  The Company intends to  
Impairment of Assets      clarify IASB's original   adopt the amendments to 
                          intention to require:     IAS 36 in its financial 
In May 2013, the IASB                               statements for the      
published Recoverable     - the disclosure of the   annual period beginning 
Amount Disclosures for    recoverable amount of     April 1, 2014. The      
Non-Financial Assets      impaired assets; and      Company does not expect 
detailing narrow scope    - additional disclosures  the amendments to have a
amendments to IAS 36      about the measurement of  material impact on the  
Impairment of Assets.     the recoverable amount of financial statements.   
                          impaired assets when the                          
The effective date for    recoverable amount is                             
the amendments to IAS 36  based on fair value less                          
is annual periods         costs of disposal,                                
beginning on or after     including the discount                            
January 1, 2014. These    rate when a present value                         
amendments are to be      technique is used to                              
applied retrospectively   measure the recoverable                           
and earlier adoption is   amount.                                           
permitted for periods                                                       
when IFRS 13 is applied.                                                    
                                                                            
----------------------------------------------------------------------------

 
Outstanding Share Data  
The following table represents the number of Common Shares and
options outstanding:  


 
As at February 11, 2014                                                     
(thousands)                                                                 
----------------------------------------------------------------------------
Common Shares                                                         39,030
Options                                                                3,093
----------------------------------------------------------------------------

 
On July 13, 2005, CMG adopted a rolling stock option plan which
allows the Company to grant options to its employees and directors to
acquire Common Shares of up to 10% of the outstanding Common Shares
at the date of grant. Based upon this calculation, at February 11,
2014, CMG could grant up to 3,903,000 stock options. 
Disclosure Controls and Procedures and Internal Control over
Financial Reporting 
Management is responsible for establishing and maintaining disclosure
controls and procedures ("DC&P") and internal control over financial
reporting ("ICFR") as defined under National Instrument 52-109. These
controls and procedures were reviewed and the effectiveness of their
design and operation was evaluated in fiscal 2013 in accordance with
the COSO control framework. The evaluation confirmed the
effectiveness of DC&P and ICFR at March 31, 2013. During our fiscal
year 2014, we continue to monitor and review our controls and
procedures. 
During the nine months ended December 31, 2013, there have been no
significant changes to the Company's ICFR that have materially
affected, or are reasonably likely to materially affect, the
company's ICFR. 
Outlook 
Our annuity/maintenance revenue stream continued to grow during the
first nine months of fiscal 2014 with a recorded increase of 6%,
compared to the same period of the previous fiscal year, with the
most significant growth coming from the US at 23%. Over 80% of our
software license revenue is derived from our annuity and maintenance
contracts, and with a strong renewal rate, we expect to see continued
growth in this revenue base. We continue to experience increased
license usage by our existing large clients as well as adding new
accounts.  
Our geographical diversification allows us to take advantage of
opportunities internationally, and we will continue to extend our
reach globally and focus our efforts on sustaining high renewal rates
as well as increasing the number of licenses sold to both existing
and new customers. 
Although professional services are not the primary source of our
revenue, we were able to grow this business by $2.0 million in the
first nine months of fiscal 2014 as compared to the same period of
the prior fiscal year. 
Our profit margin continued to hold strong, demonstrating our
continuous commitment to effectively manage our corporate costs. For
the nine months ended December 31, 2013, our EBITDA represented 52%
of our total revenue, remaining consistent with the same period of
the previous fiscal year.  
CMG continues to focus its resources on the development, enhancement
and deployment of simulation software tools relevant to the
challenges and opportunities facing its diverse customer base. We
strive to invest 20% of our top line towards continuous improvement
of our product features as well as development of new capabilities in
order to maintain our technological distinction and take advantage of
new opportunities. We will continue fostering value-based, long-term
relationships with our clients while helping them solve problems
associated with hydrocarbon recovery, with an emphasis on the
advanced recovery processes, which are increasing in complexity and
where our products continue to gain increasing importance. With the
growth in unconventional hydrocarbon and enhanced oil recovery
("EOR") projects around the globe, we are seeing an increase in the
use of reservoir simulation software by reservoir engineers. This
growth in simulation use has been reflected in the number and types
of projects being simulated and the amount of simulation done on each
project. More recently, the North American market is seeing an
increased opportunity in shale gas and liquids which use complex
recovery processes that necessitate the use of simulation. 
One of the instrumental parts of our success includes training
programs which we offer to our customers to enable them to become
more efficient and effective users of our software. We continue to
see strong class attendance across all the regions. 
CMG's joint project to develop the newest generation of dynamic
reservoir modelling systems ("DRMS Project") continued to progress
during the third quarter of the current fiscal year. The most recent
beta version of the software was released at the beginning of
calendar 2013, and the limited commercial release of the software was
expected to be delivered to our partner companies, for the purposes
of testing it on selected assets, by the end of calendar 2013. The
upcoming release achieved its target of successfully simulating a
complex integrated asset model; however, an unanticipated additional
complexity in the model has delayed the software release to our
partners to the fourth quarter of fiscal 2014. CMG and its partners
remain committed to funding the ongoing development and to the future
success of the project. 
The excellent reputation behind our Company and its product suite
offering will continue to enable us to grow and sustain a healthy
market share while generating solid software license revenue. With
our strong working capital position, we are well positioned to
continue to invest in all aspects of our business in order to
continue to grow and diversify our revenue base and to ultimately
return value to our shareholders in the form of regular quarterly
dividend payments and growth in share value.  
Kenneth M. Dedeluk, President and Chief Executive Officer 
February 11, 2014  


 
COMPUTER MODELLING GROUP LTD.                                               
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION                     
                                                                            
UNAUDITED (thousands of Canadian $)      December 31, 2013    March 31, 2013
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
Current assets:                                                             
  Cash                                              64,708            59,419
  Trade and other receivables                       15,446            19,141
  Prepaid expenses                                   1,417             1,216
  Prepaid income taxes (note 7)                        122               341
----------------------------------------------------------------------------
                                                    81,693            80,117
Property and equipment                               2,622             3,304
----------------------------------------------------------------------------
Total assets                                        84,315            83,421
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities and Shareholders' Equity                                        
Current liabilities:                                                        
  Trade payables and accrued liabilities             5,311             6,047
  Income taxes payable (note 7)                        866               296
  Deferred revenue                                  18,069            25,289
----------------------------------------------------------------------------
                                                    24,246            31,632
Deferred tax liability (note 7)                        228               379
----------------------------------------------------------------------------
Total liabilities                                   24,474            32,011
----------------------------------------------------------------------------
                                                                            
Shareholders' equity:                                                       
  Share capital                                     51,251            40,498
  Contributed surplus                                5,312             4,673
  Retained earnings                                  3,278             6,239
----------------------------------------------------------------------------
Total shareholders' equity                          59,841            51,410
----------------------------------------------------------------------------
Total liabilities and shareholders'                                         
 equity                                             84,315            83,421
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME    
                                                                            
                                       Three months ended  Nine months ended
                                           December 31        December 31   
UNAUDITED (thousands of Canadian $                                          
 except per share amounts)                  2013      2012     2013     2012
----------------------------------------------------------------------------
                                                                            
Revenue (note 4)                          19,227    16,802   54,527   49,341
----------------------------------------------------------------------------
                                                                            
Operating expenses                                                          
  Sales, marketing and professional                                         
   services                                4,119     3,778   11,605   11,333
  Research and development (note 5)        3,816     3,136   10,706    9,061
  General and administrative               1,717     1,612    4,995    4,534
----------------------------------------------------------------------------
                                           9,652     8,526   27,306   24,928
----------------------------------------------------------------------------
Operating profit                           9,575     8,276   27,221   24,413
                                                                            
Finance income (note 6)                      674       280    1,160      422
----------------------------------------------------------------------------
Profit before income and other taxes      10,249     8,556   28,381   24,835
Income and other taxes (note 7)            3,044     2,437    8,487    7,266
----------------------------------------------------------------------------
                                                                            
Net and total comprehensive income         7,205     6,119   19,894   17,569
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Earnings Per Share                                                          
Basic (note 8(e))                           0.19      0.16     0.52     0.47
Diluted (note 8(e))                         0.18      0.16     0.50     0.45
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                            
COMPUTER MODELLING GROUP LTD.                                               
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                      
                                                                            
                                                                            
UNAUDITED (thousands of              Common  Contributed  Retained    Total 
 Canadian $)                  Share Capital      Surplus  Earnings   Equity 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2012               31,751        3,535    10,793   46,079 
Total comprehensive income                                                  
 for the period                           -            -    17,569   17,569 
Dividends paid                            -            -   (21,806) (21,806)
Shares issued for cash on                                                   
 exercise of stock options                                                  
 (note 8(b))                          5,061            -         -    5,061 
Common shares buy-back (notes                                               
 8(b) & (c))                            (80)           -    (1,471)  (1,551)
Stock-based compensation:                                                   
  Current period expense                  -        1,888         -    1,888 
  Stock options exercised                                                   
   (note 8(b))                          973         (973)        -        - 
----------------------------------------------------------------------------
Balance, December 31, 2012           37,705        4,450     5,085   47,240 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2013               40,498        4,673     6,239   51,410 
Total comprehensive income                                                  
 for the period                           -            -    19,894   19,894 
Dividends paid                            -            -   (22,855) (22,855)
Shares issued for cash on                                                   
 exercise of stock options                                                  
 (note 8(b))                          9,149            -         -    9,149 
Stock-based compensation:                                                   
  Current period expense                  -        2,243         -    2,243 
  Stock options exercised                                                   
   (note 8(b))                        1,604       (1,604)        -        - 
----------------------------------------------------------------------------
Balance, December 31, 2013           51,251        5,312     3,278   59,841 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
See accompanying notes to condensed consolidated financial statements.      
                                                                            
                                                                          
COMPUTER MODELLING GROUP LTD.                                             
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                           
                                                                          
                                     Three months ended Nine months ended 
                                        December 31        December 31    
UNAUDITED (thousands of Canadian $)      2013      2012     2013     2012 
--------------------------------------------------------------------------
                                                                          
Cash flows from operating activities                                      
  Net income                            7,205     6,119   19,894   17,569 
Adjustments for:                                                          
  Depreciation                            397       411    1,151    1,122 
  Income and other taxes (note 7)       3,044     2,437    8,487    7,266 
  Stock-based compensation (note                                          
   8(d))                                  940       656    2,243    1,888 
  Interest income (note 6)               (160)     (133)    (479)    (409)
--------------------------------------------------------------------------
                                       11,426     9,490   31,296   27,436 
Changes in non-cash working capital:                                      
  Trade and other receivables          (2,256)    1,775    3,698    4,855 
  Trade payables and accrued                                              
   liabilities                          1,428       660     (736)    (549)
  Prepaid expenses                       (259)      179     (201)     188 
  Deferred revenue                     (1,277)   (2,731)  (7,220)  (6,183)
--------------------------------------------------------------------------
Cash generated from operating                                             
 activities                             9,062     9,373   26,837   25,747 
  Interest received                       160       132      476      412 
  Income taxes paid                    (2,498)   (2,785)  (7,849)  (9,241)
--------------------------------------------------------------------------
Net cash from operating activities      6,724     6,720   19,464   16,918 
--------------------------------------------------------------------------
                                                                          
Cash flows from financing activities                                      
Proceeds from issue of common shares    1,475     1,273    9,149    5,061 
Dividends paid                         (7,020)   (6,050) (22,855) (21,806)
Common shares buy-back (note 8(c))          -         -        -   (1,551)
--------------------------------------------------------------------------
Net cash used in financing                                                
 activities                            (5,545)   (4,777) (13,706) (18,296)
--------------------------------------------------------------------------
                                                                          
Cash flows used in investing                                              
 activities                                                               
Property and equipment additions         (216)     (401)    (469)  (1,760)
--------------------------------------------------------------------------
Increase (decrease) in cash               963     1,542    5,289   (3,138)
Cash, beginning of period              63,745    50,694   59,419   55,374 
--------------------------------------------------------------------------
Cash, end of period                    64,708    52,236   64,708   52,236 
--------------------------------------------------------------------------
--------------------------------------------------------------------------
                                                                            
See accompanying notes to condensed consolidated financial statements.      

 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
For the three and nine months ended December 31, 2013 and 2012
(unaudited). 
1. Reporting Entity:  
Computer Modelling Group Ltd. ("CMG") is a company domiciled in
Alberta, Canada and is incorporated pursuant to the Alberta Business
Corporations Act, with its Common Shares listed on the Toronto Stock
Exchange under the symbol "CMG". The address of CMG's registered
office is Suite 200, 1824 Crowchild Trail N.W., Calgary, Alberta,
Canada, T2M 3Y7. The condensed consolidated financial statements as
at and for the three and nine months ended December 31, 2013 comprise
CMG and its subsidiaries (together referred to as the "Company"). The
Company is a computer software technology company engaged in the
development and licensing of reservoir simulation software. The
Company also provides professional services consisting of highly
specialized support, consulting, training, and contract research
activities.  
2. Basis of Preparation:  
(a) STATEMENT OF COMPLIANCE:  
These condensed consolidated financial statements have been prepared
in accordance with International Accounting Standard ("IAS") 34,
Interim Financial Reporting. Accordingly, the condensed consolidated
financial statements do not include all of the information required
for full annual financial statements, and should be read in
conjunction with the Company's most recent annual consolidated
financial statements as at and for the year ended March 31, 2013
which have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board ("IASB"), and using the accounting
policies disclosed in note 3 of the Company's annual consolidated
financial statements as at and for the year ended March 31, 2013. 
These unaudited condensed consolidated financial statements as at and
for the three and nine months ended December 31, 2013 were authorized
for issuance by the Board of Directors on February 11, 2014. 
(b) BASIS OF MEASUREMENT:  
The condensed consolidated financial statements have been prepared on
the historical cost basis, which is based on the fair value of the
consideration at the time of the transaction. 
(c) FUNCTIONAL AND PRESENTATION CURRENCY:  
The condensed consolidated financial statements are presented in
Canadian dollars, which is the functional currency of CMG and its
subsidiaries. All financial information presented in Canadian dollars
has been rounded to the nearest thousand.  
(d) USE OF ESTIMATES, JUDGMENTS AND ASSUMPTIONS:  
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions that
affect the application of accounting policies, the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue, costs and expenses for the period. Estimates and
underlying assumptions are based on historical experience and other
assumptions that are considered reasonable in the circumstances and
are reviewed on an on-going basis. Actual results may differ from
such estimates and it is possible that the differences could be
material. Revisions to accounting estimates are recognized in the
period in which the estimates are revised and in any future periods
affected. In preparing these condensed consolidated financial
statements, the significant judgments made by management in applying
the Company's accounting policies and the key sources of estimation
uncertainty are the same as those applied in the annual IFRS
consolidated financial statements for the year ended March 31, 2013. 
3. Significant Accounting Policies:  
The condensed consolidated financial statements should be read in
conjunction with the Company's annual financial statements for the
year ended March 31, 2013 prepared in accordance with IFRS applicable
to those annual consolidated financial statements. Except as
disclosed below, the same accounting policies, presentation and
methods of computation have been followed in these condensed
consolidated financial statements as were applied in the Company's
consolidated financial statements for the year ended March 31, 2013.  
NEW STANDARDS AND INTERPRETATIONS ADOPTED: 
The Company has adopted the following new standards and amendments to
standards, with a date of initial application of April 1, 2013: 


 
--  IFRS 10 Consolidated Financial Statements
    Replaces the guidance in IAS 27 Consolidated and Separate Financial
    Statements and SIC-12 Consolidation - Special Purpose Entities, and
    provides a single model to be applied in the control analysis for all
    investees, including entities that currently are special purpose
    entities in the scope of SIC-12. The adoption of IFRS 10 did not have a
    material impact on the condensed consolidated interim financial
    statements.
      
--  IFRS 11 Joint Arrangements
    Under IFRS 11, joint arrangements are classified as either joint
    operations or joint ventures. IFRS 11 replaces the guidance in IAS 31
    Interest in Joint Ventures, and essentially carves out of previous
    jointly controlled entities, those arrangements which although
    structured through a separate vehicle, such separation is ineffective
    and the parties to the arrangement have rights to the assets and
    obligations for the liabilities and are accounted for as joint
    operations in a fashion consistent with jointly controlled
    assets/operations under IAS 31. In addition, under IFRS 11, joint
    ventures must now use the equity method of accounting. The adoption of
    IFRS 11 did not have a material impact on the condensed consolidated
    interim financial statements.
      
--  IFRS 12 Disclosure of Interests in Other Entities
    Contains the disclosure requirements for entities that have interests in
    subsidiaries, joint arrangements, associates and/or unconsolidated
    structured entities. The adoption of IFRS 12 did not have a material
    impact on the condensed consolidated interim financial statements.
      
--  IFRS 13 Fair Value Measurement
    Replaces the fair value measurement guidance contained in individual
    IFRSs with a single source of fair value measurement guidance. It
    defines fair value as the price that would be received to sell an asset
    or paid to transfer a liability in an orderly transaction between market
    participants at the measurement date, i.e. an exit price. The standard
    also establishes a framework for measuring fair value and sets out
    disclosure requirements for fair value measurement to provide
    information that enables financial statement users to assess the methods
    and inputs used to develop fair value measurements and, for recurring
    fair value measurements that use significant unobservable inputs (Level
    3), the effect of the measurements on profit or loss or other. Due to
    the nature of the Company's financial assets and liabilities, the
    adoption of IFRS 13 did not have a material impact on the condensed
    consolidated interim financial statements. It only resulted in the
    inclusion of certain fair value disclosures which were previously
    applicable to annual financial statements only (refer to note 9).
      
--  Amendments to IAS 1 Presentation of Financial Statements
    Requires an entity to present separately the items of other
    comprehensive income that may be reclassified to profit or loss in the
    future from those that would never be reclassified to profit or loss. As
    the amendments only required changes in the presentation of items in
    other comprehensive income, the new standard did not have a material
    impact on the condensed consolidated interim financial statements.
      
--  Amendments to IFRS 7 Offsetting Financial Assets and Liabilities
    Contains new disclosure requirements for offset financial assets and
    liabilities and netting arrangements. The amendments to IFRS 7 did not
    have a material impact on the condensed consolidated interim financial
    statements. 
 
4. Revenue:                                                                 
                                                                            
For the three months ended December 31,                                     
(thousands of $)                                          2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Software licenses                                       17,220       15,369 
Professional services                                    2,007        1,433 
----------------------------------------------------------------------------
                                                        19,227       16,802 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
(thousands of $)                                          2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Software licenses                                       48,491       45,302 
Professional services                                    6,036        4,039 
----------------------------------------------------------------------------
                                                        54,527       49,341 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
5. Research and Development Costs:                                          
                                                                            
For the three months ended December 31,                                     
(thousands of $)                                          2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Research and development                                 4,125        3,586 
Scientific research and experimental development                            
 ("SR&ED") investment tax credits                         (309)        (450)
----------------------------------------------------------------------------
                                                         3,816        3,136 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
(thousands of $)                                          2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Research and development                                12,080       10,458 
Scientific research and experimental development                            
 ("SR&ED") investment tax credits                       (1,374)      (1,397)
----------------------------------------------------------------------------
                                                        10,706        9,061 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
6. Finance Income and Finance Costs:                                        
                                                                            
For the three months ended December 31,                                     
(thousands of $)                                          2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest income                                            160          133 
Net foreign exchange gain                                  514          147 
----------------------------------------------------------------------------
Finance income                                             674          280 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
For the nine months ended December 31,                                      
(thousands of $)                                          2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest income                                            479          409 
Net foreign exchange gain                                  681           13 
----------------------------------------------------------------------------
Finance income                                           1,160          422 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
7. Income and Other Taxes:  
The major components of income tax expense are as follows: 


 
For the nine months ended December 31,                                      
(thousands of $)                                          2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current year income taxes                                7,727        6,655 
Adjustment for prior year                                    6           67 
----------------------------------------------------------------------------
Current income taxes                                     7,733        6,722 
Deferred tax expense (recovery)                           (151)         (61)
Foreign withholding and other taxes                        905          605 
----------------------------------------------------------------------------
                                                         8,487        7,266 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The provision for income and other taxes reported differs from the
amount computed by applying the combined Canadian Federal and
Provincial statutory rate to the profit before income and other
taxes.  
The reasons for this difference and the related tax effects are as
follows: 


 
For the nine months ended December 31,                                      
(thousands of $, unless otherwise stated)                 2013         2012 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Combined statutory tax rate                              25.00%       25.00%
----------------------------------------------------------------------------
Expected income tax                                      7,095        6,209 
Non-deductible costs                                       582          494 
Effect of tax rates in foreign jurisdictions               129           17 
Withholding taxes                                          678          454 
Adjustment for prior year                                    6           67 
 
Other                                                       (3)          25 
----------------------------------------------------------------------------
                                                         8,487        7,266 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The components of the Company's deferred tax liability are as
follows: 


 
(thousands of $)                        December 31, 2013    March 31, 2013 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tax liability on SR&ED investment tax                                       
 credits                                             (244)             (362)
Tax asset (liability) on property and                                       
 equipment                                             16               (17)
----------------------------------------------------------------------------
Deferred tax liability                               (228)             (379)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
All movement in deferred tax assets and liabilities is recognized
through net income of the respective period. 
Prepaid income taxes and current income taxes payable have not been
offset as the amounts relate to income taxes levied by different tax
authorities to different taxable entities. 
8. Share Capital:  
(a) AUTHORIZED:  
An unlimited number of Common Shares, an unlimited number of
Non-Voting Shares, and an unlimited number of Preferred Shares,
issuable in series. 
(b) ISSUED:  


 
(thousands of shares)                                         Common Shares 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, April 1, 2012                                               37,307 
Issued for cash on exercise of stock options                            601 
Common shares buy-back                                                  (91)
----------------------------------------------------------------------------
Balance, December 31, 2012                                           37,817 
----------------------------------------------------------------------------
                                                                            
Balance, April 1, 2013                                               38,129 
Issued for cash on exercise of stock options                            884 
----------------------------------------------------------------------------
Balance, December 31, 2013                                           39,013 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
Subsequent to December 31, 2013, 17,000 stock options were exercised
for cash proceeds of $206,000.  
On May 23, 2012, the Board of Directors considered the merits of
renewing the Company's shareholder rights plan on or before the
third-year anniversary of shareholder approval of the plan and
determined that it was in the best interest of the Company to
continue to have a shareholder rights plan in place. Upon careful
review, the Board of Directors agreed to approve an amended and
restated rights plan (the "Amended and Restated Rights Plan") between
the Company and Valiant Trust Company, which is similar in all
respects to the existing shareholder rights plan, with the exception
of certain minor amendments. The Amended and Restated Rights Plan was
approved by the Company's shareholders on July 12, 2012.  
(c) COMMON SHARES BUY-BACK:  
On April 16, 2012, the Company announced a Normal Course Issuer Bid
("NCIB") commencing on April 18, 2012 to purchase for cancellation up
to 3,416,000 of its Common Shares. During the year ended March 31,
2013, a total of 91,000 Common Shares were purchased at market price
for a total cost of $1,551,000. 
On April 29, 2013, the Company announced a NCIB commencing on May 1,
2013 to purchase for cancellation up to 3,538,000 of its Common
Shares. During the nine months ended December 31, 2013, no Common
Shares were purchased. 
(d) STOCK-BASED COMPENSATION PLAN:  
The Company adopted a rolling stock option plan as of July 13, 2005,
which was reaffirmed by the Company's shareholders on July 7, 2011,
which allows it to grant options to acquire Common Shares of up to
10% of the outstanding Common Shares at the date of grant. Based upon
this calculation, at December 31, 2013, the Company could grant up to
3,901,000 stock options. Pursuant to the stock option plan, the
maximum term of an option granted cannot exceed five years from the
date of grant. The outstanding stock options vest as to 50% after the
first year anniversary, from date of grant, and then vest as to 25%
of the total options granted after each of the second and third year
anniversary dates.  
The following table outlines changes in stock options:  


 
                                                                            
(thousands except per      For the nine months ended    For the year ended  
 share amounts)                December 31, 2013          March 31, 2013    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                    Weighted
                                              Weighted               Average
                                               Average              Exercise
                                Options Exercise Price  Options        Price
                                Granted      ($/share)   Granted   ($/share)
----------------------------------------------------------------------------
Outstanding at beginning                                                    
 of period                        2,938          13.13     2,903        9.85
Granted                           1,154          24.41     1,006       18.19
Exercised                          (885)         10.34      (913)       8.15
Forfeited/cancelled                 (87)         16.34       (58)      15.09
----------------------------------------------------------------------------
Outstanding at end of                                                       
 period                           3,120          18.00     2,938       13.13
----------------------------------------------------------------------------
Options exercisable at                                                      
 end of period                    1,271          13.01     1,207        9.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The range of exercise prices of stock options outstanding and
exercisable at December 31, 2013 is as follows: 


 
                            Outstanding                    Exercisable      
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                Weighted    Weighted                Weighted
                                 Average     Average                 Average
                  Number of    Remaining    Exercise   Number of    Exercise
Exercise Price      Options  Contractual       Price     Options       Price
 ($/option)     (thousands) Life (years)  ($/option) (thousands)  ($/option)
----------------------------------------------------------------------------
7.80 - 9.07             490          1.4        8.80         490        8.80
9.08 - 13.43            641          2.6       13.39         407      
 13.38
13.44 - 18.18           836          3.6       18.13         372       18.12
18.19 - 26.19         1,153          4.6       24.39           2       20.00
----------------------------------------------------------------------------
                      3,120          3.4       18.00       1,271       13.01
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The fair value of stock options granted was estimated using the
Black-Scholes option pricing model under the following assumptions: 


 
                                For the nine months ended For the year ended
                                        December 31, 2013     March 31, 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Fair value at grant date                                                    
 ($/option)                                  3.06 to 4.33       2.45 to 3.83
Share price at grant date                                                   
 ($/share)                                 24.40 to 26.19     17.90 to 21.75
Risk-free interest rate (%)                  1.21 to 1.64       1.13 to 1.33
Estimated hold period prior to                                              
 exercise (years)                                  2 to 4             2 to 4
Volatility in the price of                                                  
 common shares (%)                               26 to 28           27 to 36
Dividend yield per common share                                             
 (%)                                         2.96 to 3.21       3.39 to 4.12
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
The Company recognized total stock-based compensation expense for the
three and nine months ended December 31, 2013 of $940,000 and
$2,243,000 respectively (three and nine months ended December 31,
2012 - $656,000 and $1,888,000 respectively).  
(e) EARNINGS PER SHARE:  
The following table summarizes the earnings and weighted average
number of Common Shares used in calculating basic and diluted
earnings per share: 


 
For the three months                                                        
 ended December 31,                                                         
(thousands except per                                                       
 share amounts)                          2013                           2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                           Weighted                       Weighted          
                            Average Earnings               Average  Earnings
               Earnings      Shares Per Share Earnings      Shares Per Share
                    ($) Outstanding ($/share)      ($) Outstanding ($/share)
----------------------------------------------------------------------------
Basic             7,205      38,939      0.19    6,119      37,754      0.16
Dilutive                                                                    
 effect of                                                                  
 stock options                  921                          1,103          
----------------------------------------------------------------------------
Diluted           7,205      39,860      0.18    6,119      38,857      0.16
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
For the nine months                                                         
ended December 31,                                                          
(thousands except per                                                       
share amounts)                           2013                           2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                           Weighted                       Weighted          
                            Average Earnings               Average  Earnings
               Earnings      Shares Per Share Earnings      Shares Per Share
                    ($) Outstanding ($/share)      ($) Outstanding ($/share)
----------------------------------------------------------------------------
Basic            19,894      38,616      0.52   17,569      37,538      0.47
Dilutive                                                                    
 effect of                                                                  
 stock options                  975                          1,127          
----------------------------------------------------------------------------
Diluted          19,894      39,591      0.50   17,569      38,665      0.45
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
During the three and nine months ended December 31, 2013, 40,000 and
Nil options, respectively (three and nine months ended December 31,
2012 - 31,000, and 118,000 respectively), were excluded from the
computation of the weighted-average number of diluted shares
outstanding because their effect was not dilutive. 
9. Financial Instruments:  
(i) Classification of financial instruments  


 
                                               Classification    Measurement
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash                                         Held for trading     Fair value
Trade and other receivables             Loans and receivables Amortized cost
Trade payables and accrued                    Other financial Amortized cost
 liabilities                                      liabilities               
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
(ii) Fair values of financial instruments  
The carrying values of cash, trade and other receivables, trade
payables and accrued liabilities approximate their fair values due to
the short-term nature of these instruments. 
10. Commitments:  
(a) RESEARCH COMMITMENTS:  
The Company is the operator of the DRMS research and development
project (the "DRMS project"), a collaborative effort with its
partners Shell International Exploration and Production BV ("Shell")
and Petroleo Brasileiro S.A. ("Petrobras"), to jointly develop the
newest generation of reservoir and production system simulation
software. The project has been underway since 2006 and, with the
ongoing support of the participants, it is expected to continue until
ultimate delivery of the software. The Company's share of costs
associated with the project is estimated to be $5.5 million ($2.6
million net of overhead recoveries) for fiscal 2014. 
(b) LEASE COMMITMENTS:  
The Company has operating lease commitments relating to its office
premises with minimum annual lease payments as follows:  


 
Nine months ended December 31,                                              
(thousands of $)                                    2013                2012
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Less than one year                                   518                 499
Between one and five years                         5,170               7,089
----------------------------------------------------------------
------------
                                                   5,688               7,588
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
11. Line Of Credit:  
The Company has arranged for a $1.0 million line of credit with its
principal banker, which can be drawn down by way of a demand
operating credit facility or may be used to support letters of
credit. As at December 31, 2013, US $165,000 (March 31, 2013 - US
$165,000) had been reserved on this line of credit for the letter of
credit supporting a performance bond. 
12. Segmented Information:  
The Company is organized into one operating segment represented by
the development and licensing of reservoir simulation software. The
Company provides professional services, consisting of support,
training, consulting and contract research activities, to promote the
use and development of its software; however, these activities are
not evaluated as a separate business segment.  
Revenues and property and equipment of the Company arise in the
following geographic regions: 


 
(thousands of $)                 Revenue            Property and equipment  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                        For the nine months ended                           
                              December 31,            As at December 31,    
                                2013          2012         2013         2012
----------------------------------------------------------------------------
                                                                            
Canada                        19,610        19,243        2,423        3,323
United States                 11,155         8,736           54           49
South America                  9,411         8,345           83           51
Eastern Hemisphere(1)         14,351        13,017           62           44
----------------------------------------------------------------------------
                              54,527        49,341        2,622        3,467
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1)Includes Europe, Africa, Asia and Australia.                             

 
In the nine months ended December 31, 2013 and 2012, no customer
represented 10% or more of total revenue. 
13. Joint Operation:  
The Company is the operator of a joint software development project,
the DRMS project, which gives the Company exclusive rights to
commercialize the jointly developed software while the other partners
will have unlimited software access for their internal use.
Accordingly, the Company records its proportionate share of costs
incurred on the project (37.04%) as research and development costs
within the condensed consolidated statements of operations and
comprehensive income. 
For the three and nine months ended December 31, 2013, CMG included
$1.3 million and $3.5 million, respectively (2012 - $1.0 million and
$2.8 million, respectively) of costs in its condensed consolidated
statements of operations and comprehensive income related to this
joint project.  
Additionally, the Company is entitled to charge the project for
various services provided as operator, which were recorded in revenue
as professional services and amounted to $0.6 million and $1.8
million during the three and nine months ended December 31, 2013
(2012 - $0.4 million and $1.3 million, respectively). 
14. Subsequent Events:  
On February 11, 2014, the Board of Directors declared a quarterly
cash dividend of $0.19 per share on its Common Shares, payable on
March 14, 2014, to all shareholders of record at the close of
business on March 7, 2014. 
Contacts:
Computer Modelling Group Ltd.
Kenneth M. Dedeluk
President & CEO
(403) 531-1300
ken.dedeluk@cmgl.ca 
Computer Modelling Group Ltd.
Sandra Balic
Vice President, Finance & CFO
(403) 531-1300
(403) 289-8502 (FAX)
sandra.balic@cmgl.ca
www.cmgl.ca
 
 
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