Computer Modelling Group keeps “Neutral” rating at Ventum

Ventum Capital Markets analyst Amr Ezzat said in a July 29 report that he is maintaining a “Neutral” rating and C$9.00 target price on Computer Modelling Group (Computer Modelling Group Stock Quote, Chart, News, Analysts, Financials TSXV:CMG), which is expected to release its first-quarter fiscal 2026 results after market close on August 6.

“Following the removal of segment-level reporting in Q4/F25 and a reset in investor expectations, we approach Q1/F26 with a tempered outlook,” he said.

His estimates are unchanged heading into the quarter.

Ezzat forecasts sales of $28.9-million and EBITDA of $6.6-million, representing a 5.3% year-over-year decline and a 23.0% margin, both below Street estimates of $29.5-million in revenue and $8.6-million in EBITDA.

Computer Modelling Group develops and licenses reservoir simulation software used by oil and gas companies to improve hydrocarbon recovery from subsurface reservoirs.

“Management expects the Sharp acquisition to support growth and sees continued traction in Seismic, although it remains cautious about organic performance amid macro-driven softness in R&P and the wind-down of services,” Ezzat said. “Margins are expected to remain flat near term, with cost takeout benefits lagging, but no carryover pressure is anticipated into F2027. As a reminder, the first half of the fiscal year is typically seasonally weaker.”

Ezzat expects stable annuity and maintenance revenue of $19.5-million in Q1, up 0.9% year over year and 0.3% quarter over quarter. He forecasts professional services revenue of $8.3-million, down 7.3% year over year and 8% sequentially, in line with management’s guidance for a $6–7 million annual decline as CoFlow and non-core Bluware services wind down. He projects perpetual license revenue of $1.0-million, down 52.6% from last year but up 80.5% from Q4. Annuity and license fees are expected to contribute just $0.2-million in the quarter due to seasonal contract timing.

“While FQ1 is likely to reflect seasonal softness and an evolving mix, the long-term focus remains unchanged: expanding higher-margin software revenues, compounding FCF, and reducing dependence on Professional Services,” he said. “In that context, muted services revenue or flat total growth may reflect strategic repositioning rather than execution issues. M&A continues to be a central pillar, with management viewing acquisitions as the primary lever to accelerate free cash flow per share over time.”

He said the recent appointment of Amrit Khullar as CFO is notable, given his background as former CFO of Constellation Software’s Perseus operating group. The move signals continued alignment with Constellation Software’s decentralized, acquisition-focused model and embeds more of CSU’s corporate philosophy within CMG’s leadership.

“That said, until recurring A&M growth begins to offset Professional Services attrition more materially, we expect the shares to remain range-bound.”

Ezzat said CMG’s Q4/F25 results came in below expectations, with revenue of $33.7-million and EBITDA of $10.5-million, missing both consensus and his own estimates. He added that more concerning than the miss was the drop in disclosure, as the company omitted segment-level detail that had become standard. This lack of granularity makes it harder to assess how well the company’s acquired businesses are performing relative to legacy operations.

“We believe the operational weakness is multi-faceted – and admittedly more pronounced than we expected,” he said. “The US CCS market has cooled, with many tax-incentive-driven feasibility studies (under the IRA) not renewing. Smaller operators are under pressure, and customers are increasingly rationalizing software spend across vendors. Meanwhile, professional services revenue is expected to decline by $6–7M in F2026, simulation growth visibility has deteriorated faster than anticipated, and while Seismic is a bright spot, it still represents a smaller portion of the mix.”

Ezzat thinks the company will do $42.5-million in Adjusted EBITDA on revenue of $126.2-million in fiscal 2026. He thinks those numbers will improve to $47.2-million on revenue of $132.6-million in fiscal 2027.

-30-