THIRD QUARTER HIGHLIGHTS

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Computer Modelling Group Announces Third Quarter Results

(February 10, 2012)

CALGARY, ALBERTA -- (Marketwire) -- 02/10/12 -- Computer Modelling Group Ltd. ("CMG" or the "Company") (TSX:CMG) is very pleased to announce our third quarter results for the three and nine months ended December 31, 2011.

THIRD QUARTER HIGHLIGHTS

For the three months ended December 31, 2011 2010 $ change % change ($ thousands, except per share data) ---------------------------------------------------------------------------- Annuity/maintenance software licenses 12,056 7,999 4,057 51% Perpetual software licenses 2,321 2,335 (14) -1% Total revenue 15,898 12,063 3,835 32% Operating profit 8,093 5,516 2,577 47% Net income 5,790 3,563 2,227 63% Earnings per share - basic 0.16 0.10 0.06 60% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands, except per share data) ---------------------------------------------------------------------------- Annuity/maintenance software licenses 30,361 24,178 6,183 26% Perpetual software licenses 9,308 7,134 2,174 30% Total revenue 43,819 37,449 6,370 17% Operating profit 22,411 18,145 4,266 24% Net income 16,771 12,358 4,413 36% Earnings per share - basic 0.46 0.34 0.12 35% ----------------------------------------------------------------------------

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 9, 2012, 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, 2011 and the audited consolidated financial statements and MD&A for the years ended March 31, 2011 and 2010 contained in the 2011 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.

Effective on the close of business on June 20, 2011, CMG's Common Shares were split on a two-for-one basis. Accordingly, all comparative number of shares and per share amounts have been retroactively adjusted to reflect the two-for-one split.

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 2011 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 contains the terms "direct employee costs" and "other corporate costs" which are not measures defined by IFRS, do not have standardized meaning prescribed by IFRS and should not be considered an alternative to expenses as determined in accordance with IFRS. Direct employee costs and other corporate costs, as computed by CMG, may differ from similar measures as reported by other issuers. These non-IFRS measures are presented in this MD&A because management considers them to be important in highlighting the quantitative impact of cost management as it relates to corporate and people-related costs. The items constituting direct employee costs are outlined in the table under the "Expenses" heading.

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 approximately 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 and Dubai. CMG's Common Shares are listed on the Toronto Stock Exchange ("TSX") and trade under the symbol "CMG".

QUARTERLY PERFORMANCE

Fiscal 2010(1) Fiscal 2011(2) ($ thousands, unless otherwise stated) Q4 Q1 Q2 Q3 Q4 ---------------------------------------------------------------------------- Annuity/maintenance licenses 7,653 8,325 7,855 7,999 8,531 Perpetual licenses 4,982 1,824 2,975 2,335 3,911 ---------------------------------------------------------------------------- Software licenses 12,635 10,149 10,830 10,333 12,442 Professional services 1,657 1,905 2,502 1,730 1,936 ---------------------------------------------------------------------------- Total revenue 14,292 12,054 13,332 12,063 14,378 Operating profit 7,844 5,933 6,695 5,516 7,523 Operating profit % 55 49 50 46 52 Profit before income and other taxes 7,710 6,178 6,565 5,278 7,413 Income and other taxes 2,350 1,949 1,999 1,715 2,605 Net income for the period 5,360 4,229 4,565 3,563 4,808 Cash dividends declared and paid 3,209 6,274 3,430 3,623 3,643 ---------------------------------------------------------------------------- Per share amounts - ($/share) Earnings per share - basic 0.15 0.12 0.13 0.10 0.13 Earnings per share - diluted 0.15 0.12 0.13 0.10 0.13 Cash dividends declared and paid 0.09 0.175 0.095 0.10 0.10 ---------------------------------------------------------------------------- Fiscal 2012(3) ($ thousands, unless otherwise stated) Q1 Q2 Q3 ---------------------------------------------------------------------------- Annuity/maintenance licenses 8,997 9,308 12,056 Perpetual licenses 5,391 1,596 2,321 ---------------------------------------------------------------------------- Software licenses 14,388 10,904 14,377 Professional services 1,551 1,078 1,521 ---------------------------------------------------------------------------- Total revenue 15,939 11,982 15,898 Operating profit 9,092 5,226 8,093 Operating profit % 57 44 51 Profit before income and other taxes 9,240 6,096 8,184 Income and other taxes 2,577 1,778 2,394 Net income for the period 6,663 4,318 5,790 Cash dividends declared and paid 7,519 4,053 4,079 ---------------------------------------------------------------------------- Per share amounts - ($/share) Earnings per share - basic 0.18 0.12 0.16 Earnings per share - diluted 0.18 0.11 0.15 Cash dividends declared and paid 0.205 0.11 0.11 ---------------------------------------------------------------------------- 1. Q4 of fiscal 2010 includes $0.4 million in revenue that pertains to usage of CMG's products in prior quarters. 2. Q1, Q2, Q3 and Q4 of fiscal 2011 include $1.1 million, $0.2 million, $0.3 million and $0.1 million, respectively, in revenue that pertains to usage of CMG's products in prior quarters. 3. Q1, Q2, and Q3 of fiscal 2012 include $0.3 million, $0.04 million and $2.6 million, respectively, in revenue that pertains to usage of CMG's products in prior quarters.

Note: all quarterly data contained in the above table has been prepared in accordance with IFRS.

Highlights

During the nine months ended December 31, 2011, as compared to the same period of prior fiscal year, CMG:

-- Increased annuity/maintenance revenue by 26%; -- Increased perpetual sales by 30%; -- Increased net income by 36%; -- Increased gross spending on research and development by 12%; -- Realized earnings per share of $0.46, representing a 35% increase.

Revenue

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Software licenses 14,377 10,333 4,044 39% Professional services 1,521 1,730 (209) -12% ---------------------------------------------------------------------------- Total revenue 15,898 12,063 3,835 32% ---------------------------------------------------------------------------- Software license revenue - % of total revenue 90% 86% Professional services - % of total revenue 10% 14% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Software licenses 39,669 31,312 8,357 27% Professional services 4,150 6,137 (1,987) -32% ---------------------------------------------------------------------------- Total revenue 43,819 37,449 6,370 17% ---------------------------------------------------------------------------- Software license revenue - % of total revenue 91% 84% Professional services - % of total revenue 9% 16% ----------------------------------------------------------------------------

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 32% and 17% for the three and nine months ended December 31, 2011, respectively, due to increases in both our annuity/maintenance and perpetual license revenue streams. The increases in software licenses revenue were partially offset by the decreases in fees earned from 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-then-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. CMG has found that the majority of its customers who have acquired perpetual software licenses subsequently purchase maintenance licenses to ensure they have access to current versions of CMG's software.

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Annuity/maintenance licenses 12,056 7,999 4,057 51% Perpetual licenses 2,321 2,335 (14) -1% ---------------------------------------------------------------------------- Total software license revenue 14,377 10,333 4,044 39% ---------------------------------------------------------------------------- Annuity/maintenance as a % of total software license revenue 84% 77% Perpetual as a % of total software license revenue 16% 23% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Annuity/maintenance licenses 30,361 24,178 6,183 26% Perpetual licenses 9,308 7,134 2,174 30% ---------------------------------------------------------------------------- Total software license revenue 39,669 31,312 8,357 27% ---------------------------------------------------------------------------- Annuity/maintenance as a % of total software license revenue 77% 77% Perpetual as a % of total software license revenue 23% 23% ----------------------------------------------------------------------------

Total software license revenue increased by 39% and 27% during the three and nine months ended December 31, 2011, respectively, compared to the same periods of the previous fiscal year. The increase in our quarterly total software license revenue was driven by the increase in annuity/maintenance license sales. Our year-to-date increase in total software license revenue was supported by growth in both annuity/maintenance and perpetual license sales.

CMG's annuity/maintenance license revenue increased by 51% and 26% during the three and nine months ended December 31, 2011, respectively, compared to the same periods of last year. While we have seen strong growth in these license sales throughout the year, the significant contributor to the increase in the quarterly revenue, which also had a positive impact on the year-to-date revenue growth, is a payment received from one of our large customers for whom revenue recognition criteria are fulfilled only at the time of the receipt of funds. The payment was received for the licenses and services provided in past periods (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). Payments from this customer have at times been irregular, with the last payment having been received in Q1 2011, which is reflected in our year-to-date comparative numbers. The payment received in the current quarter represents the initial payment for a multi-year arrangement with this long-standing client. We expect to continue to receive payments under this arrangement, however, the amount and timing is uncertain and, accordingly, may introduce some variability in our quarterly revenue results.

If we were to adjust our quarterly and year-to-date annuity/maintenance licenses revenue, by removing revenue from this one customer for the current and prior fiscal year, we would see that the annuity/maintenance license sales have grown by 19% and 20% in the three and nine months ended December 31, 2011, respectively, compared to the same periods of the previous fiscal year. These increases were driven by sales to new and existing clients as well as the increase in maintenance revenue tied to our strong perpetual sales generated in the previous quarters. Our annuity/maintenance license revenue, representing a recurring revenue stream, continues experiencing steady growth quarter over quarter as evidenced by consecutive quarterly increases in this revenue stream over the past several fiscal years.

The increase in annuity/maintenance revenue as measured in Canadian dollars has been negatively affected by the strengthening of the Canadian dollar relative to the US dollar in the current fiscal year. The table below illustrates revenue generated in US dollars and the rates at which it was converted into Canadian dollars to show the movement in US dollar denominated revenue without the impact of the foreign exchange. Had the exchange rate between the US and Canadian dollars remained constant between the three and nine months ended December 31, 2011 and 2010, our third quarter annuity/maintenance revenue would have increased by 56% (instead of 51%) and our year-to-date annuity/maintenance revenue would have increased by 30% (instead of 26%).

Our perpetual license sales for the three months ended December 31, 2011, were virtually unchanged from the same period of the previous fiscal year, whereas, they increased by 30% for the nine months ended December 31, 2011, compared to the same period of the previous fiscal year. The year-to-date increase is driven by a multi-million perpetual contract closed in the first quarter of the current fiscal year. 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, we expect to observe fluctuations in the quarterly perpetual revenue amounts throughout the fiscal year.

We can observe from the table below that our year-to-date perpetual sales in US dollars were negatively affected by the foreign exchange movement between the US and Canadian dollars as a result of the strengthening Canadian dollar in the current fiscal year. Had the exchange rate between the US and Canadian dollars remained constant between the nine months ended December 31, 2011 and 2010, our year-to-date perpetual license revenue would have increased by 39% (instead of 30%). The foreign exchange rates had a minimum impact on our quarterly perpetual sales.

The following table summarizes the US dollar denominated revenue and the weighted average exchange rates at which it was converted to Canadian dollars:

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- US dollar annuity/maintenance license sales US$ 8,711 US$ 5,161 3,550 69% Weighted average conversion rate 0.992 1.044 ---------------------------------------------------------------------------- Canadian dollar equivalent CDN$ 8,643 CDN$ 5,389 3,254 60% ---------------------------------------------------------------------------- US dollar perpetual license sales US$ 1,866 US$ 1,883 (17) -1% Weighted average conversion rate 1.019 1.025 ---------------------------------------------------------------------------- Canadian dollar equivalent CDN$ 1,902 CDN$ 1,930 (28) -1% ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- US dollar annuity/maintenance license sales US$ 20,160 US$ 15,907 4,253 27% Weighted average conversion rate 0.993 1.049 ---------------------------------------------------------------------------- Canadian dollar equivalent CDN$ 20,020 CDN$ 16,683 3,337 20% ---------------------------------------------------------------------------- US dollar perpetual license sales US$ 9,144 US$ 4,618 4,526 98% Weighted average conversion rate 0.969 1.036 ---------------------------------------------------------------------------- Canadian dollar equivalent CDN$ 8,857 CDN$ 4,784 4,073 85% ----------------------------------------------------------------------------

REVENUE BY GEOGRAPHIC SEGMENT

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Annuity/maintenance revenue Canada 4,007 2,859 1,148 40% United States 2,139 1,779 360 20% Other 5,910 3,361 2,549 76% ---------------------------------------------------------------------------- 12,056 7,999 4,057 51% ---------------------------------------------------------------------------- Perpetual revenue Canada 420 405 15 4% United States 390 248 142 57% Other 1,511 1,682 (171) -10% ---------------------------------------------------------------------------- 2,321 2,335 (14) -1% ---------------------------------------------------------------------------- Total software license revenue Canada 4,427 3,264 1,163 36% United States 2,529 2,026 503 25% Other 7,421 5,043 2,378 47% ---------------------------------------------------------------------------- 14,377 10,333 4,044 39% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Annuity/maintenance revenue Canada 11,648 8,013 3,635 45% United States 6,191 5,184 1,007 19% Other 12,522 10,981 1,541 14% ---------------------------------------------------------------------------- 30,361 24,178 6,183 26% ---------------------------------------------------------------------------- Perpetual revenue Canada 452 2,350 (1,898) -81% United States 992 1,262 (270) -21% Other 7,864 3,522 4,342 123% ---------------------------------------------------------------------------- 9,308 7,134 2,174 30% ---------------------------------------------------------------------------- Total software license revenue Canada 12,100 10,363 1,737 17% United States 7,183 6,446 737 11% Other 20,386 14,503 5,883 41% ---------------------------------------------------------------------------- 39,669 31,312 8,357 27% ----------------------------------------------------------------------------

On a geographic basis, total software license sales increased across all regions with Canada and the United States experiencing increases of 17% and 11%, respectively, for the nine months ended December 31, 2011 compared to the same periods of previous fiscal year. This growth has been led by the increases in annuity/maintenance revenue stream. Our other markets grew total software license revenue by 41% in the nine months ended December 31, 2011 compared to the same period of previous fiscal year, driven mainly by the increase in perpetual sales.

The Canadian market experienced strong growth in the recurring annuity/maintenance revenue stream as evidenced by the increases of 40% and 45% for the three and nine months ended December 31, 2011 compared to the same periods of the previous fiscal year. The increases in the annuity revenue stream were supported by the increase in sales to both existing and new clients. In addition, strong perpetual license sales generated in the past have enabled the Canadian market to maintain increased revenue levels from the maintenance contracts tied to those perpetual licenses. On the other hand, perpetual sales during the current fiscal year did not reach the same levels of the perpetual sales made during the previous fiscal year, offsetting the increase in year-to-date annuity/maintenance revenue.

Similar to the Canadian market, the US market also experienced growth in annuity/maintenance revenue with the increases of 20% and 19% recorded for the three and nine months ended December 31, 2011 compared to the same periods of the previous fiscal year. While perpetual revenue grew by $0.1 million in the three months ended December 31, 2011, it decreased by $0.3 million for the nine months ended December 31, 2011 offsetting the growth in year-to-date annuity/maintenance revenue.

Other markets experienced increases of 76% and 14% in annuity/maintenance revenue stream for the three and nine months ended December 31, 2011, respectively, compared to the same periods of the previous fiscal year. The growth in quarterly annuity/maintenance revenue occurred solely due to inclusion of the payment for the contract for which revenue is recognized on a cash basis (see more detailed discussion under "Software License Revenue"). On a year-to-date basis, the effect of the inclusion of this significant amount during the current quarter is somewhat mitigated by the similar inclusion of a significant amount on the same contract in Q1 of the previous fiscal year.

While the perpetual sales in other markets decreased only slightly during three months ended December 31, 2011, they increased by 123% on a year-to-date basis driven solely by the large perpetual sale made during the first quarter of the current fiscal year. In addition to closing one significant contract, we have seen a general increase in the number of perpetual license sales made to other markets.

The movements in perpetual sales across the 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 be strong and growing across all regions.

The increases in US-dollar generated revenue from the US and other markets have been negatively affected by the strengthening Canadian dollar compared to the US dollar during the nine months ended December 31, 2011.

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.

DEFERRED REVENUE

2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Deferred revenue at: March 31 16,755 13,843 2,912 21% June 30 15,326 12,496 2,830 23% September 30 14,600 12,658 1,942 15% December 31 14,746 11,892 2,854 24% ----------------------------------------------------------------------------

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 a 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 general trend of declining deferred revenue balance from March 31 to December 31. Deferred revenue at December 31, 2011 increased compared to the same period of prior fiscal year due to both renewal of the existing and signing of the new software licenses and maintenance contracts in the quarter. Our deferred revenue balance continues to grow at a steady pace as demonstrated in the table above by the consecutive quarterly double-digit growth experienced during the current fiscal year.

PROFESSIONAL SERVICES REVENUE

CMG recorded professional services revenue of $1.5 million and $4.2 million for the three and nine months ended December 31, 2011, respectively, representing decreases of $0.2 million and $2.0 million from the amounts recorded for the same periods of previous fiscal year. CMG had been engaged in a few large projects in the previous fiscal year, which are either complete or continue on a smaller scale in the current fiscal year, causing the majority of the decrease in the quarterly and year-to-date professional services revenue. Additionally, the funding commitment for the DRMS project received from the CMG Reservoir Simulation Foundation ("Foundation CMG") was fulfilled in the first quarter of the current fiscal year further contributing to the decrease in the professional services revenue. Refer to the discussion under "Commitments, Off Balance Sheet Items and Transactions with Related Parties."

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.

At December 31, 2011, approximately $0.08 million (2010 - $0.5 million) is included in deferred revenue relating to professional services.

Expenses

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Sales, marketing and professional services 3,536 2,836 700 25% Research and development 2,747 2,408 339 14% General and administrative 1,522 1,303 219 17% ---------------------------------------------------------------------------- Total operating expenses 7,805 6,547 1,258 19% ---------------------------------------------------------------------------- Direct employee costs(i) 6,063 5,022 1,041 21% Other corporate costs 1,742 1,525 217 14% ---------------------------------------------------------------------------- 7,805 6,547 1,258 19% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Sales, marketing and professional services 9,703 8,704 999 11% Research and development 7,635 6,941 694 10% General and administrative 4,070 3,659 411 11% ---------------------------------------------------------------------------- Total operating expenses 21,408 19,304 2,104 11% ---------------------------------------------------------------------------- Direct employee costs(i) 17,028 14,845 2,183 15% Other corporate costs 4,380 4,459 (79) -2% ---------------------------------------------------------------------------- 21,408 19,304 2,104 11% ----------------------------------------------------------------------------

(i)Includes salaries, bonuses, stock-based compensation, benefits and commissions.

CMG's total operating expenses increased by 19% and 11% for the three and nine months ended December 31, 2011, respectively, compared to the same periods of previous fiscal year mainly as a result of an increase in direct employee costs. While other corporate costs increased during the quarter, they remained relatively consistent on a year-to-date basis.

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, 2011 related to staff costs compared to 77% recorded in the comparative period of last year. Staffing levels for the first nine months of the current fiscal year grew in comparison to the same period of previous fiscal year to support our continued growth. At December 31, 2011, CMG's staff complement was 148 employees, up from 131 employees as at December 31, 2010. Direct employee costs increased during the three and nine months ended December 31, 2011 compared to the same period of previous fiscal year, due to staff additions, increased levels of compensation, commissions and related benefits.

OTHER CORPORATE COSTS

Other corporate costs increased by 14% for the three months ended December 31, 2011 compared to the same period of previous fiscal year, due to incurring promotional, marketing and other expenses associated with the Society of Petroleum Engineers' Annual Technical Conference and Exhibition which took place in the third quarter of the current fiscal year and the second quarter of the previous fiscal year, and due to inclusion of the costs associated with the expansion of our office space at the end of calendar 2011.

Other corporate costs decreased slightly for the nine months ended December 31, 2011 compared to the same period of previous fiscal year mainly as a result of the inclusion of the expenses associated with CMG's biennial technical symposium in the second quarter of the previous fiscal year which is offset by the increase in the costs associated with the expanded office space.

RESEARCH AND DEVELOPMENT

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Research and development (gross) 3,104 2,658 446 17% SR&ED credits (357) (250) (107) 43% ---------------------------------------------------------------------------- Research and development 2,747 2,408 339 14% ---------------------------------------------------------------------------- Research and development as a % of total revenue 17% 20% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Research and development (gross) 8,656 7,709 947 12% SR&ED credits (1,021) (768) (253) 33% ---------------------------------------------------------------------------- Research and development 7,635 6,941 694 10% ---------------------------------------------------------------------------- Research and development as a % of total revenue 17% 19% ----------------------------------------------------------------------------

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 includes CMG's proportionate share of joint research and development costs on the DRMS system development of $0.6 million and $2.0 million for the three and nine months ended December 31, 2011, respectively, (2010 - $0.6 million and $2.0 million). See discussion under "Commitments, Off Balance Sheet Items and Transactions with Related Parties."

The increases of 17% and 12% in our gross spending on research and development for the three and nine months ended December 31, 2011, respectively, demonstrate our continued commitment to advancement of our technology. Research and development costs, net of research and experimental development ("SR&ED") credits, increased by 14% and 10% during the three and nine months ended December 31, 2011, respectively, compared to the same periods of previous fiscal year mainly due to increased employee-related costs. At the same time, we had an increase in SR&ED credits driven by the increases in our direct employee costs as well as the increase in the eligibility of our expenses for SR&ED credits as a direct result of the completion of the grant received from Foundation CMG which had been netted against our research and development expenses for purposes of calculating SR&ED credits. The funding commitment associated with this grant was fulfilled in the first quarter of the current fiscal year. Refer to the discussion under "Commitments, Off Balance Sheet Items and Transactions with Related Parties."

DEPRECIATION AND AMORTIZATION

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Depreciation of property and equipment, allocated to: Sales, marketing and professional services 118 76 42 55% Research and development 145 131 14 11% General and administrative 58 66 (8) -12% ---------------------------------------------------------------------------- Total depreciation and amortization 321 273 48 18% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Depreciation of property and equipment, allocated to: Sales, marketing and professional services 305 220 85 39% Research and development 383 344 39 11% General and administrative 189 187 2 1% ---------------------------------------------------------------------------- Total depreciation and amortization 877 751 126 17% ----------------------------------------------------------------------------

The quarterly and year-to-date increases in depreciation and amortization reflect the increase in our asset base, mainly as a result of increased spending on computing resources and expansion of the office space at the end of Q3 2012.

FINANCE INCOME AND COSTS

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Interest income 123 91 32 35% Foreign exchange gain - - - - ---------------------------------------------------------------------------- Finance income 123 91 32 35% ---------------------------------------------------------------------------- Finance costs (represented by foreign exchange loss) (32) (329) 297 -90% ----------------------------------------------------------------------------

For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Interest income 341 179 162 91% Foreign exchange gain 768 - 768 - ---------------------------------------------------------------------------- Finance income 1,109 179 930 520% ---------------------------------------------------------------------------- Finance costs (represented by foreign exchange loss) - (303) 303 - ----------------------------------------------------------------------------

Interest income increased in the three and nine months ended December 31, 2011, compared to the same periods of the prior fiscal year, due to slight improvement in interest rates and investing larger cash balances.

CMG is impacted by the movement of the US dollar against the Canadian dollar as approximately 72% (2010 - 67%) of CMG's revenue for the nine months ended December 31, 2011 is denominated in US dollars, whereas only approximately 23% (2010 - 24%) of CMG's total costs are denominated in US dollars.

Nine month CDN$ to US$ At June 30 At September 30 At December 31 trailing average ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 2009 0.8602 0.9327 0.9555 0.9108 2010 0.9429 0.9711 1.0054 0.9697 2011 1.0370 0.9626 0.9833 1.0132 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

CMG recorded a foreign exchange loss of $0.03 million and a foreign exchange gain of $0.8 million for the three and nine months ended December 31, 2011, respectively, compared to a $0.3 million foreign exchange loss recorded in the three and nine months ended December 31, 2010.

The weakening of the Canadian dollar in the current quarter, along with a significant fluctuation in the exchange rates between the Canadian and the US dollars during the first nine months of the current fiscal year, have contributed positively to the valuation of our US-denominated working capital, hence, contributing to the foreign exchange gain in the current fiscal year-to-date.

INCOME AND OTHER TAXES

CMG's effective tax rate for the nine months ended December 31, 2011 is reflected as 28.69% (2010 - 31.42%), whereas the prevailing Canadian statutory tax rate is now 26.13%. This 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, 2011 2010 $ change % change ($ thousands, except per share amounts) ---------------------------------------------------------------------------- Total revenue 15,898 12,063 3,835 32% Operating expenses (7,805) (6,547) (1,258) 19% ---------------------------------------------------------------------------- Operating profit 8,093 5,516 2,577 47% Operating profit as a % of total revenue 51% 46% ---------------------------------------------------------------------------- Net income for the period 5,790 3,563 2,227 63% Net income for the period as a % of total revenue 36% 30% ---------------------------------------------------------------------------- Earnings per share ($/share) 0.16 0.10 0.06 60% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands, except per share amounts) ---------------------------------------------------------------------------- Total revenue 43,819 37,449 6,370 17% Operating expenses (21,408) (19,304) (2,104) 11% ---------------------------------------------------------------------------- Operating profit 22,411 18,145 4,266 24% Operating profit as a % of total revenue 51% 48% ---------------------------------------------------------------------------- Net income for the period 16,771 12,358 4,413 36% Net income for the period as a % of total revenue 38% 33% ---------------------------------------------------------------------------- Earnings per share ($/share) 0.46 0.34 0.12 35% ----------------------------------------------------------------------------

Operating profit as a percentage of total revenue increased to 51% for the three and nine months ended December 31, 2011, compared to 46% and 48% recorded in the same periods of the previous fiscal year, as a result of the increase in our total revenue driven by the increases in our software licenses revenue, and effective management of our corporate costs.

Net income for the period as a percentage of revenue increased to 36% and 38% for the three and nine months ended December 31, 2011, respectively, compared to 30% and 33% recorded in the same periods of previous fiscal year mainly as a result of the positive effect of the changes in foreign exchange rates recorded in the current fiscal year compared to the previous fiscal year and incurring less tax expenses as a result of lower withholding taxes and lower statutory tax rate.

Liquidity and Capital Resources

For the three months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Cash, beginning of period 43,310 32,565 10,745 33% Cash flow from (used in) Operating activities 7,511 8,378 (867) -10% Financing activities (2,404) (2,669) 265 -10% Investing activities (802) (262) (540) 206% ---------------------------------------------------------------------------- Cash, end of period 47,615 38,012 9,603 25% ---------------------------------------------------------------------------- For the nine months ended December 31, 2011 2010 $ change % change ($ thousands) ---------------------------------------------------------------------------- Cash, beginning of period 41,753 28,826 12,927 45% Cash flow from (used in) Operating activities 18,673 20,465 (1,792) -9% Financing activities (11,745) (10,344) (1,401) 14% Investing activities (1,066) (935) (131) 14% ---------------------------------------------------------------------------- Cash, end of period 47,615 38,012 9,603 25% ----------------------------------------------------------------------------

OPERATING ACTIVITIES

Cash flow generated from operating activities decreased by $0.9 million and $1.8 million in the three and nine months ended December 31, 2011, respectively, compared to the same periods of last year, due to the timing differences when the sales are made and when the resulting receivables are collected, net impact of changes in income taxes payable, trade payables and deferred revenue balance.

FINANCING ACTIVITIES

Cash used in financing activities during the three months ended December 31, 2011 decreased by $0.3 million compared to the same period of last year, as a result of recording more cash proceeds from options being exercised. Cash used in financing activities during the nine months ended December 31, 2011, increased by $1.4 million compared to the same period of last year, as a result of issuing larger dividends and buying back common shares.

During the nine months ended December 31, 2011, CMG employees and directors exercised options to purchase 698,000 Common Shares, which resulted in cash proceeds of $4.3 million.

In the nine months ended December 31, 2011, CMG paid $15.7 million in dividends, representing quarterly dividends of $0.105, $0.11 and $0.11 per share and a special dividend of $0.10 per share. On February 9, 2012, CMG announced the payment of a quarterly dividend of $0.13 per share on CMG's Common Shares. The dividend will be paid on March 15, 2012 to shareholders of record at the close of business on March 8, 2012.

On April 6, 2011, the Company announced a Normal Course Issuer Bid ("NCIB") commencing on April 7, 2011 to purchase for cancellation up to 1,636,000 of its Common Shares. During the nine months ended December 31, 2011, 33,000 Common Shares were purchased at market price for a total cost of $438,000.

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, 2011, CMG expended $1.1 million on property and equipment additions, primarily composed of computing equipment, and currently has a capital budget of $2.4 million for fiscal 2012.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2011, CMG has $47.6 million in cash, no debt and has access to just over $0.8 million under a line of credit with its principal banker.

Duri
Copyright @ Marketwire

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