Management’s Discussion and Analysis Q2 2025

For the three and six months ended September 30, 2024

==> picture [124 x 42] intentionally omitted <==

==> picture [612 x 73] intentionally omitted <==

==> picture [143 x 143] intentionally omitted <==

CEO Letter to Shareholders

November 12, 2024

Dear Fellow Shareholders,

Each quarter I aim to share with you the most recent developments and progress. This quarter marks one full year of Bluware under CMG’s ownership and to keep the big picture in mind, I want to comment on how our acquisition strategy has contributed to the overall performance of CMG Group. In the trailing twelve-month period (ended September 30, 2024), we have significantly bolstered our financial performance. Our revenue has increased by $42.3 million, or 51% and even though we are still early in the commercial transformation of Bluware, Adjusted EBITDA has increased by $3.1 million, or 8%. Bluware also started us on a promising path towards developing an open ecosystem of upstream products for the industry, based on the most advanced sciencebacked technologies. This underscores the value of our acquisition approach to not only accelerate financial growth but also to broaden our capabilities, allowing us to offer a more comprehensive suite of solutions to our customers. I have more conviction than ever in the value creation potential of our strategy as we continue to execute.

Q2 2025

In November of 2022, I wrote my first letter to shareholders and shared how my career has been guided by the principle of “extreme ownership” so I will be the first to say that, on the surface, a 1% total revenue increase in the CMG operating segment was modest given our performance over the last two years. I own that performance, and while it is just one quarter, I will explain why I have not lost enthusiasm for what we are building and the long-term opportunity in front of us.

CMG has significant potential for long-term growth supported by new customer growth, increasing share of wallet, modest price increases and ensuring strong renewals. Demonstrating profitable growth with strong margins and healthy Free Cash Flow conversion is a priority as it ensures flexibility for our M&A strategy and provides a benchmark to the incoming lower margin businesses (acquisitions).

In the CMG operating segment, I am very pleased to share that we secured a sizeable new, multi-year contract for both our core oil and gas simulation and energy transition, evidencing our strong market position. The timing of the contract was after the end of the quarter which means that for reporting purposes, it did not offset a decline in annuity/maintenance (“A/M”) revenue for Q2 but will be recorded starting in Q3. The decline in A/M revenue was largely due to a contract that didn’t renew, and which included a portion of short-term licenses. That particular contract had a moderate impact on the quarter. While it is not unusual to have small fluctuation in renewals, I committed to being fully transparent with our shareholders and to presenting a balanced view of wins and losses when I call them out. I am very proud of the team for a multi-year A/M contract covering both core and energy transition, but any loss still stings.

The percentage of software revenue attributable to energy transition was 19% in the quarter, compared to 22% in the prior year period. This fluctuation is reasonable given what we know about how energy transition projects, CCS in particular, have varying demands for simulation depending on the stage of the projects. From a trend perspective, on a year-to-date basis, energy transition represented 24% of software revenue this year compared to 22% in the first half of fiscal 2024, evidencing ongoing growth.

CEO Letter to Shareholders

Computer Modelling Group Ltd. Q2 25

Looking forward, I am paying close attention to renewal season in Q4 of this year. As is typical for CMG, we renew a large volume of contracts in the fourth quarter and this year, several multi-year contracts are up for renewal. From my recent customer conversations, I know that the industry continues to weigh the trade-offs of speed, price, and accuracy. Pressures remain and ensuring that we are strategic about how we approach pricing and bundling to deliver the best value for our customers will be critical to achieving our growth objective. As I said last quarter, “effortless is a myth”. We will have to work hard and with diligence to maintain our competitive edge.

We continue to successfully manage the CMG operating segment for strong profitability as evidenced by the sequential increase in Adjusted EBITDA Margin to 45%, from 42% in the first quarter of the year. Free Cash Flow per share of $0.07 was lower than the prior year reflecting the performance of Bluware in the current quarter. Free Cash Flow per share was consistent with the Q1 of this year.

Second quarter performance for BHV was in line with expectation. As we enter Q3 and Q4, we anticipate most of our contract renewals will occur, leading to an expected higher revenue in the coming two quarters (a reminder that 50% of the contract value of the renewals is recognized, from an accounting perspective, at the time of signing).

Solutions

Over the past several months, I traveled extensively and engaged with our customers. These meetings are always insightful and what stood out to me is that I have never encountered a brand as strong as CMG in my career. Our customers consistently emphasize that no other company matches CMG in terms of the scientific integrity of our products and the quality of our service. While other simulators are used, CMG is often regarded as the “North Star” – the most trusted technology, backed by solid math and physics. This is a significant advantage.

To remain the most trusted and sought-after solutions provider, we must continue to be responsive to the market and that is evident in the shift in our approach to product development. In September, we launched Focus CCS, a purpose-driven simulation tool designed to accelerate the preliminary selection and validation process for CO2 storage sites. I’m pleased to report it is receiving strong market interest.

Beyond meeting a specific market need, Focus CCS represents a significant process innovation for CMG. Leveraging our new R&D talent at our C3 Center in India, we created an intuitive interface and guided workflows to enhance user experience and with a focus on API integration that lays the foundation for future product innovation and faster launches.

Think of it like building with LEGO blocks: by breaking down core services into modular components, we can construct solutions of varying sizes and complexities.

Last week, we announced a partnership with NVIDIA, marking a significant step forward for CMG and underscoring our commitment to evolving our solutions. As I mentioned, speed is crucial to our customers. Advances in highperformance computing, AI, and machine learning will profoundly impact the industry, and we are prioritizing our position to innovate during these transformative times. We look forward to close collaboration with NVIDIA.

Acquisition Strategy

With the recent acquisition of Sharp Reflections, we have invested additional capital, at our target IRR rate, and have expanded our seismic interpretation capabilities. These are concrete steps towards our vision of bringing together an open ecosystem of new and innovative technologies to disrupt the upstream workflow. This expansion is not about ad-hoc additions but a strategic selection of companies that enhance critical functions in the upstream workflow, making the whole greater than the sum of its parts. Integrating these technologies to provide users with a single version of the truth, breaking down silos, and simplifying access to answers is crucial.

CEO Letter to Shareholders

Computer Modelling Group Ltd. Q2 25

As we refine our acquisition processes and approach, it is clear to me that there are many strong opportunities that align with our IRR hurdle rate and vision. To ensure we maintain the financial flexibility to take advantage of our pipeline, we have begun to evaluate various credit facility options to supplement our Free Cash Flow. Leverage can be an effective tool but, in my career, I have also seen what happens when it goes unchecked. My priority is to deploy our Free Cash Flow primarily and to potentially use leverage strategically to supplement on an as needed basis. Most importantly, I want to reassure our shareholders that I believe in maintaining a strong balance sheet and that financial leverage should be used carefully and opportunistically to enhance shareholder value without taking on undue risk.

In Closing

The cricket analogies resonate for me, so I’ll close with yet another. Cricket is a game of patience and strategy, much like our corporate journey. While the scoreboard might show our performance in short bursts, akin to quarterly reports, it’s the cumulative runs over the entire match that determine the outcome. Just as a cricket team invests in training and refining their techniques to build a solid foundation for future matches, we are investing in our product and processes to ensure sustainable growth. Acquiring new businesses is like adding skilled players to our team, making us stronger and more versatile. Together, these efforts ensure that we’re not just playing for the next over, but for the entire match.

I continue to be honored to have the opportunity to lead CMG through this transformative time.

Sincerely,

Pramod Jain

Chief Executive Officer

This letter to shareholders forms an integral part of our Management's Discussion and Analysis (“MD&A”) and includes forwardlooking information and forward-looking statements (together, "Forward Looking Statements") within the meaning of applicable securities laws, and measures that do not have a standard meaning prescribed by the IFRS Accounting Standards ("IFRS"), including the financial measure "Free Cash Flow" to indicate financial performance. For detailed information on these ForwardLooking Statements, non-IFRS measures, and associated risks, please see the relevant sections in our MD&A dated November 12, 2024, accessible on SEDAR+ (www.sedarplus.ca) and our website (www.cmgl.ca/investors/financial-reports).

CEO Letter to Shareholders

Computer Modelling Group Ltd. Q2 25

==> picture [60 x 21] intentionally omitted <==

Computer Modelling Group Ltd. announces its second quarter results for the three and six months ended September 30, 2024.

SECOND QUARTER 2025 CONSOLIDATED HIGHLIGHTS

Select financial highlights

Closed the Company’s second major acquisition, Sharp Reflections GmbH (“SR” or “Sharp”), on November 12, 2024;
Generated total revenue of $29.5 million in the second quarter of fiscal 2025, compared to $22.6 million in the prior year’s quarter, reflecting a 1% increase in CMG’s revenue and a 29% contribution from BHV;
Operating profit increased to $8.4 million, an increase of 9% from the same period of the previous fiscal year, primarily due to a decrease in stock-based compensation in the quarter as a result of the decrease in share price. Adjusted operating profit decreased by 8% from the same period of the previous fiscal year, with CMG contributing to 6% and BHV contributing to 2% of the decrease;
Adjusted EBITDA Margin was 34%, compared to 47% in the same period of the previous fiscal year with CMG generating 45% and BHV generating (2%) in Adjusted EBITDA Margin;
Net income during the period was $3.8 million, a 42% decrease compared to the prior year’s quarter, primarily due to a change in the fair value of contingent consideration and FX loss incurred in the current year’s quarter, partially offset by increased operating profit;
Earnings per share was $0.05, a 38% decrease compared to the prior year’s quarter;
Reported Free Cash Flow of $0.07 per share, a decrease of 50%, primarily due to BHV generating negative cash flows.

SECOND QUARTER YEAR TO DATE 2025 CONSOLIDATED HIGHLIGHTS

Select financial highlights

Closed the Company’s second major acquisition, Sharp Reflections GmbH (“SR” or “Sharp”), on November 12, 2024;
Generated total revenue of $60.0 million for the second quarter fiscal 2025 year-to-date period, compared to $43.4 million in the prior year-to-date period, reflecting a 6% increase in CMG’s revenue and a 32% contribution from BHV;
Operating profit decreased to $14.1 million, a decrease of 19% from the same year-to-date period of the previous fiscal year, primarily due to increased stock-based compensation as a result of an increase in share price, as well as increased operating expenses from having a full quarter of Bluware operating expenses as compared to 5 days in the previous fiscal year-to-date period. Adjusted operating profit decreased by 6% from the same period of the previous fiscal year, with CMG contributing to 4% and BHV contributing to 2% of the decrease;
Adjusted EBITDA Margin was 32%, compared to 48% in the same period of the previous fiscal year with CMG generating 43% and BHV generating (3%) in Adjusted EBITDA Margin;
Net income during the period was $7.7 million, a 42% decrease compared to the prior year-to-date period;
Earnings per share was $0.09, a 47% decrease compared to the prior year-to-date period;
• Reported Free Cash Flow of $0.14 per share, a decrease of 39%, primarily due to BHV generating negative cash flows.

Second Quarter Overview

In the second quarter, total revenue grew by 30% from the prior fiscal year to $29.5 million, reflecting the acquisition of Bluware (“BHV”) which contributed 29%, and growth within the CMG operating segment of 1%. Adjusted EBITDA Margin was 34% compared to 47% in the prior year period, reflecting the acquisition of BHV which currently operates at a lower margin than CMG, and a decline in Adjusted EBITDA compared to the prior year period in the CMG operating segment, discussed below. Net income for the quarter declined to $3.8 million from $6.5 million in the prior year period, significantly impacted by a change in the fair value of contingent consideration relating to the acquisition of Bluware and foreign exchange losses. Free Cash Flow declined from $0.14 per share in the prior period to $0.07 per share, impacted by the lower Free Cash Flow generation at BHV resulting from seasonality associated with revenue recognition. Free Cash Flow per share remained constant from the first quarter of 2025. At September 30, 2024, the cash balance was $61.4 million. The effective tax rate for the quarter increased due to the non-deductibility of the change in fair value of the acquisition earnout.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

In the CMG operating segment, total revenue was up 1%, however, annuity/maintenance (“A/M”) revenue declined compared to the second quarter of 2024. Delays occurred in the closing of a sizeable new contract which would have been accretive to A/M revenue in the second quarter. This was completed after quarter-end and is expected to be recorded starting in the third quarter. Given the timing of the new contract, it did not offset a combination of variability in short-term contracts and the nonrenewal of one contract in the US which led to the modest decline.

By geography, total software revenue grew in the Eastern Hemisphere due to strong perpetual licenses, offset primarily by lower annuity/maintenance licenses in South America and the US, as mentioned above.

Software revenue attributable to energy transition was 19% in the quarter, compared to 22% in the comparable prior year period and 28% in the first quarter of this year. From a trend perspective, on a year-to-date basis, software revenue attributable to energy transition was 24% compared to 22% in the same period of the previous year, evidence of ongoing demand. CMG operating segment operating profit in the second quarter increased to $8.8 million, from $7.6 million in the prior year period, driven by a reduction in stock-based compensation expense due to lower share price, partially offset by increased expenses including headcount and headcount related costs, increased amortization of acquired IP, and other corporate costs. Sequentially from Q1 2025, CMG operating segment Adjusted Operating Profit increased by 3%. CMG operating segment Adjusted EBITDA Margin in the quarter decreased to 45% from 48% in the prior fiscal year, due primarily to higher expenses described above, but represented a small sequential increase from 42% in the first quarter of 2025. Maintaining our customary high renewal rates in the fourth quarter will be critical to achieving our revenue and profitability objectives.

In the BHV operating segment, total software revenue and professional services revenue were materially unchanged from the first quarter of 2025. A small decrease in operating expenses resulted in an Adjusted EBITDA and Adjusted EBITDA Margin of ($0.1 million), or (2%), a slight improvement from ($0.3 million) and (4%) respectively compared to the first quarter of this year. We do not expect material growth in professional services revenue throughout the balance of the year, however software revenue is expected to increase in the second half of 2025, compared to the first half of 2025, as we begin contract renewals in these quarters. The impact of this revenue recognition is expected to drive a commensurate increase in profitability. This pattern of revenue recognition and profitability aligns with our reporting since acquiring BHV. We would continue to encourage shareholders to evaluate BHV operating segment profitability on a full-year basis.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

SUMMARY OF FINANCIAL PERFORMANCE

	CMG	BHV	Consolidated
Three months ended September 30, ($thousands,exceptper share data)	2024 2023	2024 2023	2024 2023
Annuity/maintenance licenses Annuity license fee Perpetual licenses	16,794 17,441 - - 2,149 1,176	1,508 169 71 - - -	18,302 17,610 71 - 2,149 1,176
Total software license revenue Professional services	18,943 18,617 3,382 3,452	1,579 169 5,563 395	20,522 18,786 8,945 3,847
Total revenue Total revenue growth Annuity/maintenance licenses growth Cost of revenue Operating expenses Sales & marketing Research and development General & administrative	22,325 22,069 1% 22% (4%) 18% 2,332 2,271 3,363 3,362 4,463 4,651 3,389 4,214	7,142 564 1166%	29,467 22,633 30% 25% 4% 19% 5,692 2,493 4,229 3,384 6,428 4,767 4,688 4,263
		792%
		3,360 222 866 22 1,965 116 1,299 49
Operatingexpenses	11,215 12,227	4,130 187	15,345 12,414
Operating profit	8,778 7,571	(348) 155	8,430 7,726
Operating Margin Acquisition related expenses Amortization of acquired intangible assets Stock-based compensation	*39%* 34% 395 573 575 124 232 2,291	*(5%)* 27% 181 - 89 5 - -	*29%* 34% 576 573 664 129 232 2,291
Adjusted operating profit(1) Adjusted Operating Margin(1) Net income (loss) Adjusted EBITDA(1) Adjusted EBITDA Margin(1) Earnings per share – basic Free Cash Flowper share – basic(1)	9,980 10,559 *45%* 48% 4,630 6,423 10,069 10,584 *45%* 48%	(78) 160 *(1%)* 28% (867) 93 (132) 134 *(2%)* 24%	9,902 10,719 *34%* 47% 3,763 6,516 9,937 10,718 *34%* 47% 0.05 0.08 0.07 0.14

(1) Non-IFRS financial measures are defined in the “Non-IFRS Financial Measures” section.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

	CMG	BHV	Consolidated
Six months ended September 30, ($thousands,exceptper share data)	2024 2023	2024 2023	2024 2023
Annuity/maintenance licenses Annuity license fee Perpetual licenses	34,551 33,048 - - 4,259 3,025	3,086 169 249 - - -	37,637 33,217 249 - 4,259 3,025
Total software license revenue Professional services	38,810 36,073 6,662 6,744	3,335 169 11,183 395	42,145 36,242 17,845 7,139
Total revenue Total revenue growth Annuity/maintenance licenses growth Cost of revenue Operating expenses Sales & marketing Research and development General & administrative	45,472 42,817 6% 25% 5% 17% 4,952 4,176 7,504 5,717 10,514 8,703 7,533 6,886	14,518 564 2474% 1726% 6,932 222 1,656 22 4,159 116 2,644 49	59,990 43,381 38% 27% 13% 17% 11,884 4,398 9,160 5,739 14,673 8,819 10,177 6,935
Operatingexpenses	25,551 21,306	8,459 187	34,010 21,493
Operating profit	14,969 17,335	(873) 155	14,096 17,490
Operating Margin Acquisition related expenses Amortization of acquired intangible assets Stock-based compensation	*33%* 40% 395 573 1,151 181 3,138 2,395	*(6%)* 27% 369 - 178 5 - -	*23%* 40% 764 573 1,329 186 3,138 2,395
Adjusted operating profit(1) Adjusted Operating Margin(1) Net income (loss) Adjusted EBITDA(1) Adjusted EBITDA Margin(1) Earnings per share – basic Free Cash Flowper share – basic(1)	19,653 20,484 *43%* 48%	(325) 160 *(2%)* 28%	19,327 20,644 *32%* 48% 7,727 13,420 19,374 20,666 *32%* 48% 0.09 0.17 0.14 0.23
	9,995 13,327	(2,268) 93
	19,771 20,532 *43%* 48%	(397) 134 *(3%)* 24%

(1) Non-IFRS financial measures are defined in the “Non-IFRS Financial Measures” section.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (“MD&A”) of financial condition and results of operations for Computer Modelling Group Ltd. (“CMG Group”, the “Company”, “we” or “our”), dated November 12, 2024, should be read in conjunction with CMG Group’s unaudited condensed consolidated interim financial statements (the “Financial Statements”) and accompanying notes for the three and six months ended September 30, 2024 and 2023 and CMG Group’s Annual Information Form dated May 22, 2024 (“AIF”), which are available under CMG Group’s SEDAR+ profile at www.sedarplus.ca.

The Financial Statements have been prepared in accordance with IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Financial Statements are presented in Canadian dollars, which is the functional and presentation currency of CMG Group.

Figures within this MD&A are presented in Canadian dollars, unless otherwise indicated. Financial data, other than the nonIFRS financial measures, have been prepared in accordance with IFRS Accounting Standards.

This MD&A was reviewed and approved by the Audit Committee and Board of Directors and is effective November 12, 2024.

FORWARD-LOOKING INFORMATION

Certain information included in this MD&A and the CEO Letter to Shareholders (attached hereto and incorporated by reference) 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”, “endeavors”, “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.

Forward-looking information contained in this MD&A is based on management’s expectations and assumptions regarding, among other things:

future software license, maintenance and professional services sales;
mix of revenues and potential variances from period to period;
ability of the CMG operating segment to maintain Adjusted EBITDA Margin in excess of 40%;
ability of the CMG operating segment to achieve double digit total revenue growth on an annual basis;
allocation of purchase price for completed acquisitions;
acquisition-related expenses, including the potential for further performance-based earnout;
goodwill impairment tests and the possibility of future impairment adjustments;
amortization of intangible assets and stock-based compensation;
the continued financing by and participation of CMG’s CoFlow partner and it being completed in a timely manner, and the associated costs and future revenue related to CoFlow;
market demand for advanced simulation processes and complex recovery methods to address production declines in aging assets;
the Company’s ability to increase or sustain its revenue in a volatile oil price environment;
the Company’s ability to pay dividends;
the Company’s ability to continue current research activities and new product development;
the Company’s ability to capture market share in energy transition;
the Company’s ability to recruit and retain qualified staff in a particular territory or in general;
• the Company’s ability to recognize financial results of acquired businesses and assets; and

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

the Company’s ability to successfully execute on commercial partnerships and acquisitions.

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 discussed in greater detail in the “Business Risks” section of this MD&A:

Economic conditions in the energy industry;
Reliance on key customers;
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;
Information security breaches or other cyber-security threats; and
• Ability to successfully execute on acquisitions and to integrate acquired businesses and assets.

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 forwardlooking 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 forwardlooking 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.

CORPORATE PROFILE

CMG Group is a global software and consulting company providing advanced reservoir modelling capabilities to the energy industry. Through acquisitions, the Company has expanded to include software and services specializing in cloud and interactive deep learning solutions for subsurface decision-making including seismic interpretation. CMG Group provides cutting-edge technologies that support critical field development decisions for upstream planning and energy transition strategies. The Company has a diverse customer base of international oil and gas production and exploration companies in approximately 60 countries. The Company also provides professional services consisting of highly specialized support, consulting, training, and contract research activities. CMG Group has sales and technical support services based in Calgary, Houston, Oxford, Dubai, Bogota, Rio de Janeiro, Bengaluru, Kuala Lumpur, Oslo, Stavanger, and Kaiserslautern. The Company’s Common Shares are listed on the Toronto Stock Exchange (“TSX”) and trade under the symbol “CMG”. CMG Group and its subsidiaries include the following: Computer Modelling Group Inc., CMG Middle East FZ LLC, CMGL Services Company Inc., CMG Europe Ltd., CMG Collaboration Centre India Private Ltd., (together referred to as “CMG”), and CMG Holdings (USA) Inc., Bluware-Headwave Ventures Inc., Bluware Inc., and Bluware AS, (together referred to as “BHV” or “Bluware”) and Sharp Reflections GmbH, Sharp Reflections Inc., Sharp Reflections AS, and Sharp Reflections Limited, (together referred to as “SR” or “Sharp”).

BUSINESS OVERVIEW

The Company is a global software and consulting company providing advanced reservoir modelling capabilities, and cloud and interactive deep learning solutions for seismic interpretation to the energy industry. We provide cutting-edge technologies that support critical field development decisions for upstream planning and energy transition strategies.

Since its inception more than 40 years ago, CMG Group made the strategic decision to focus its research and development efforts on providing solutions for the simulation of difficult hydrocarbon recovery techniques, a decision that created the foundation for our dominant market presence today in the simulation of advanced hydrocarbon recovery processes. The Company has demonstrated this commitment by continuously investing in research and development and working closely with its customers to develop simulation tools relevant to the challenges and opportunities they face. We are experts in modelling and de-risking subsurface exploration with the use of advanced physics-based simulation software and expert consulting.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

The Company provides market-leading reservoir simulation software, recognized as the industry standard in traditional oil and gas including Enhanced Oil Recovery (“EOR”), Heavy Oil and unconventionals, and in Energy Transition including Carbon Capture and Storage (“CCS”), geothermal and hydrogen. In addition to offering reservoir simulation solutions, we have invested into the development of CoFlow, the industry’s first fully implicit, multi-user and multi-disciplinary Integrated Reservoir and Production System Modelling (“IPSM”) software application. It provides a unified solution for integrated asset modelling by combining reservoir, production networks and geomechanics in one environment and allows reservoir and production engineers to make informed decisions on large, integrated oil and gas projects.

In combination with its principal business of licensing its software, the Company also provides professional services consisting of multi-disciplinary upstream consultants that provide software proficiency and technical competency to build and optimize reservoir development plans.

CMG Group continues to pursue its CMG 4.0 strategy which is aimed at transforming us into a market-led company, driven by sustained organic growth in the reservoir simulation business and the prudent deployment of capital to pursue acquisitions that are accretive to software revenue. The organic growth strategy leverages the momentum towards digitization in the energy industry and the growing need for complex energy transition solutions to drive growth by winning new customers and selling additional products and services to existing customers. The Company sees mergers and acquisitions (“M&A”) as a growth accelerator and maintains a robust and dynamic pipeline of opportunities, investing in both engagement and outreach while continuously evaluating value creation opportunities through inorganic growth.

Significant Events

Acquisition of Sharp Reflections GmbH

On November 12, 2024, CMG Group announced the acquisition of Sharp Reflections GmbH (“SR” or “Sharp”), a software company, specializing in seismic processing and interpretation. Sharp leverages high-performance computing to process and analyze pre-stack seismic datasets in real time thereby enhancing the efficiency and quality of decision making in subsurface interpretation. The acquisition of Sharp is a natural extension of CMG Group and will enable us to further expand CMG Group’s solutions in the seismic processing and interpretation in the upstream energy workflow.

Sharp is headquartered in Stavanger, Norway with operations in UK, USA and Germany. Sharp’s customer base includes integrated oil companies (IOCs), national oil companies (NOCs) and super majors with further opportunities to expand to energy transition through CCS, offshore wind-farm development and hydrogen storage where subsurface integrity is critical.

Sharp’s flagship solution, Pre-Stack Pro (now known as Sharp Reflections software), is a leading high performance computing platform for seismic data processing and interpretation, with a specific expertise in large pre-stack seismic data sets. Sharp has recently expanded its offering to include 4D seismic analysis. Sharp works with some of the world’s largest oil and gas operators for sponsor driven development through foundation projects which aids in the continuous improvement and features offered within the Sharp Reflections software. SR also offers tech-enabled consulting services, leveraging its software to deliver studies and solutions to their customers.

This acquisition is intended to grow CMG Group’s existing software revenues and continues to demonstrate our ability to add strategic IP to our portfolio.

Refer to note 15 (b) in the condensed consolidated interim financial statements for additional information.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

Business Model

Our customers have two alternatives for licensing our software:

Annuity License Agreements

Annuity license agreements, which include a term-based software license bundled with maintenance. These agreements provide customers with rights to use the software for a fixed term, typically one year, but could be shorter or longer, and include maintenance consisting of customer support and unspecified upgrades. Annuity license agreements are issued by both CMG and BHV. Each entity allocates 50% of annuity license agreement to software license and 50% to maintenance. Both CMG and BHV recognize the maintenance component of annuity license agreements on a straight-line basis over the license period. This revenue component is recorded under “Annuity/maintenance license revenue”. We generally invoice our customers for the full amount of their contractual payment obligations at the time that they contract with us.

The software license component of the agreement has different revenue recognition for each entity, as follows:

CMG – Software annuity license revenue is recognized ratably over the term of the agreement and included in “Annuity/maintenance license” revenue.
BHV – Software annuity license revenue is recognized upfront when the software license is delivered to the customer at the start of the license term. This revenue component is recorded under “Annuity license fee”.

While both annuity/maintenance license revenue and annual license fee represent recurring revenue base, the annual license fee revenue will fluctuate quarterly due to the timing of agreement renewals which tend to be skewed towards the last two quarters of our fiscal year. Our annuity and maintenance license agreements must be renewed upon their agreement expiry. Based on our experience, a majority of customers renew their agreements upon expiry.

Maintenance license revenue is recorded under “Annuity/maintenance license” revenue and recognized on a straight-line basis over the term of the agreement. These agreements are typically renewed annually.

Perpetual License Agreements

Perpetual license agreements grant the customer the right to use the then-current version of software license in perpetuity. This revenue stream is recorded under “Perpetual license” revenue and is recognized at a point in time, upon delivery of the licensed product. Customers purchasing perpetual licenses may also enter into a separate maintenance and support agreement giving them access to customer support and software upgrades. The majority of customers who have acquired perpetual software licenses subsequently purchase a maintenance package.

Perpetual license agreements are entered into by CMG. BHV historically offered perpetual licenses and recognizes maintenance revenue from legacy perpetual licenses. Perpetual licenses are no longer sold by BHV. Perpetual license sales are variable and unpredictable in nature as the purchase decision and its timing fluctuate with the customers’ needs and budgets.

We generally invoice our customers for the full amount of their agreement at the time that they contract with us, with payment generally due within a period of 30 days.

We also offer a public cloud solution which enables customers to securely access Company’s simulators and submit simulation jobs to some of the latest and fastest hardware available in the industry optimized for maximum efficiency and faster simulation results. The cloud solution gives customers the ability to take advantage of the flexibility and economies of scale with the "pay as you go" model for hardware and CMG software. This currently represents a small part of the Company’s business and is reported under annuity/maintenance license revenue. In combination with its principal business of licensing its software, the Company also provides professional services consisting of multi-disciplinary upstream consultants that provide software proficiency and technical competency to build and optimize reservoir development plans.

In addition to consulting, we allocate significant resources to training, which is an instrumental part of our Company’s success, as it enables our customers to become more efficient and effective users of our software. Our training is continuous in nature, is offered worldwide, and it helps us in developing and maintaining long-term relationships with our customers.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

NON-IFRS FINANCIAL AND SUPPLEMENTARY FINANCIAL MEASURES

Certain financial measures in this MD&A – namely, Adjusted EBITDA and Adjusted EBITDA Margin, Free Cash Flow, adjusted operating expenses, direct employee costs, adjusted direct employee costs, other corporate costs, adjusted other corporate costs, adjusted operating profit, and Adjusted Operating Profit Margin– do not have a standard meaning prescribed by IFRS and, accordingly, may not be comparable to measures used by other companies. Management believes that these indicators nevertheless provide useful measures in evaluating the Company’s performance.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA Margin refers to net income before adjusting for depreciation and amortization expense, interest income, income and other taxes, stock-based compensation, restructuring charges, foreign exchange gains and losses, repayment of lease obligations, asset impairments, acquisition related costs and other expenses directly related to business combinations, including compensation expenses and gains or losses on contingent consideration. Adjusted EBITDA should not be construed as an alternative to operating income, net income or liquidity as determined by IFRS. The Company believes that Adjusted EBITDA and Adjusted EBITDA Margin are useful supplemental measures as they provide 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. In addition, management has determined that Adjusted EBITDA and Adjusted EBITDA Margin is a more accurate measurement of the Company’s operating performance and our ability to generate earnings as compared to EBITDA and EBITDA Margin.

	CMG	BHV	Consolidated
Three months ended September 30, ($thousands)	2024 2023	2024 2023	2024 2023
Net income (loss) Add (deduct): Depreciation and amortization Stock-based compensation Acquisition related expenses Loss on contingent consideration Income and other tax expense Interest income Foreign exchange loss (gain) Repayment of lease liabilities	4,630 6,423 1,539 1,014 232 2,291 395 573 2,112 - 1,802 2,239 (680) (692) 453 (856) (414) (408)	(867) 93 408 7 - - 181 - - - 442 38 (81) - 140 - (355) (4)	3,763 6,516 1,947 1,021 232 2,291 576 573 2,112 - 2,244 2,277 (761) (692) 593 (856) (769) (412)
Adjusted EBITDA(1)	10,069 10,584	(132) 134	9,937 10,718
Adjusted EBITDA Margin (1)	*45%* 48%	*(2%)* 24%	*34%* 47%

(1) This is a non-IFRS financial measure. Refer to definition of the measures above.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

	CMG	BHV	Consolidated
Six months ended September 30, ($thousands)	2024 2023	2024 2023	2024 2023
Net income (loss) Add (deduct): Depreciation and amortization Stock-based compensation Acquisition related expenses Loss on contingent consideration Income and other tax expense Interest income Foreign exchange loss (gain) Repayment of lease liabilities	9,995 13,327 3,037 1,975 3,138 2,395 395 573 1,913 - 3,416 4,483 (1,460) (1,452) 198 51 (861) (820)	(2,268) 93 793 7 - - 369 - - - 1,316 38 (179) - 223 - (651) (4)	7,727 13,420 3,830 1,982 3,138 2,395 764 573 1,913 - 4,732 4,521 (1,639) (1,452) 421 51 (1,512) (824)
Adjusted EBITDA(1)	19,771 20,532	(397) 134	19,374 20,666
Adjusted EBITDA Margin (1)	*43%* 48%	*(3%)* 24%	*32%* 48%

(1) This is a non-IFRS financial measure. Refer to definition of the measures above.

Adjusted EBITDA Margin was 34% and 32% for both the three and six months ended September 30, 2024, respectively, a decrease from 47% and 48%, respectively for the three and six months ended September 30, 2023.

CMG’s Adjusted EBITDA Margin is 45% and 43% for the three and six months ended September 30, 2024, respectively, compared to 48% for both the three and six months ended September 30, 2023, primarily due to an increase in operating expenses as a result of an increase in headcount and headcount related costs and other corporate costs. Refer to the “Operating Expenses” section of this MD&A for further detail on the increase in operating expenses by category.

BHV’s Adjusted EBITDA Margin for the three and six months ended September 30, 2024, is (2%) and (3%), respectively, compared to 24% for the three and six months ended September 30, 2023. Contract renewals at BHV typically occur in the third and fourth quarters, resulting in Adjusted EBITDA fluctuation on a quarterly basis. As a result of annuity license fee revenue recognition being skewed towards the last two quarters of the fiscal year, Adjusted EBITDA is expected to be lower in the first and second quarters of the fiscal year.

Free Cash Flow Reconciliation to Funds Flow from Operations

Free Cash Flow is a non-IFRS financial measure that is calculated as funds flow from operations less capital expenditures and repayment of lease liabilities. Free Cash Flow per share is calculated by dividing Free Cash Flow by the number of weighted average outstanding shares during the period. Management believes that this measure provides useful supplemental information about operating performance and liquidity, as it represents cash generated during the period, regardless of the timing of collection of receivables and payment of payables, which may reduce comparability between periods. Management uses free cash flow and free cash flow per share to help measure the capacity of the Company to pay dividends and invest in business growth opportunities.

Fiscal 2023 Fiscal 2024 Fiscal 2025

($ thousands, unless otherwise stated) Q3 Q4 Q1 Q2 Q3 Q4 Q1	Q2
Funds flow from operations 8,169 7,656 7,920 11,491 8,477 10,367 6,515 Capital expenditures(1) (211) (1,707) (45) (51) (459) (95) (93) Repayment of lease liabilities (413) (553) (412) (412) (728) (803) (743)	7,101
	(236)
	(769)
Free Cash Flow 7,545 5,396 7,463 11,028 7,290 9,469 5,679	6,096
Weighted average shares – basic(thousands) 80,511 80,603 80,685 80,834 81,067 81,314 81,476
	81,887
Free Cash Flowper share - basic 0.09 0.07 0.09 0.14 0.09 0.12 0.07	0.07

(1) Capital expenditures include cash consideration for USI acquisition in Q4 2023.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

Free Cash Flow per share has decreased by 50% and 39%, respectively, for the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year. The decrease in Free Cash Flow is primarily a result of negative cash flow generated in the BHV segment, which primarily relates to reduced net income in the period due to revenue recognition being skewed towards the third and fourth quarters of the fiscal year. Additionally, the repayment of lease liabilities has increased compared to the prior year comparative quarter as a result of the acquisition of BHV, resulting in a further decrease in free cash flow for the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year.

Adjusted operating expenses, direct employee and other corporate costs

Adjusted operating expenses include adjusted direct employee costs and adjusted other corporate costs in which adjustments are made with respect to restructuring costs, stock-based compensation, acquisition of acquired intangible assets, and acquisition related expenses. Adjusted direct employee costs include salaries, bonuses, benefits, commission expenses, and professional development. Adjusted other corporate costs include facility-related expenses, corporate reporting, professional services, marketing and promotion, computer expenses, travel, other office-related expenses, depreciation and amortization on property and equipment and right-of-use assets. Adjusted direct employee costs and adjusted 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 direct employee costs to be important in evaluating the quantitative impact of cost management of these two major expenditure pools. See “Operating Expenses” heading for a reconciliation of direct employee costs and other corporate costs to total operating expenses.

Adjusted Operating Profit and Adjusted Operating Profit Margin

Adjusted Operating Profit and Adjusted Operating Profit Margin are non-IFRS financial measures. They do not have a standard meaning prescribed by IFRS and, accordingly, may not be comparable to measures used by other companies. Adjusted Operating Profit is calculated as operating profit excluding restructuring charges, stock-based compensation, amortization of acquired intangible assets, and acquisition-related expenses. Management believes that analyzing the Company’s performance exclusive of these items illustrates underlying trends in our business and provides better comparability between periods. See “Operating Expenses” heading for analysis on items that impact Adjusted Operating Profit.

	CMG	BHV	Consolidated
Three months ended September 30, ($thousands)	2024 2023	2024 2023	2024 2023
Operating profit Add: Acquisition related expenses Amortization of acquired intangible assets Stock-based compensation	8,778 7,571 395 573 575 124 232 2,291	(348) 155 181 - 89 5 - -	8,430 7,726 576 573 664 129 232 2,291
Adjusted operating profit(1)	9,980 10,559	(78) 160	9,902 10,719
Adjusted Operating Margin (1)	*45%* 48%	*(1%)* 28%	*34%* 47%

(1) This is a non-IFRS financial measure. Refer to definition of the measures above.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

	CMG	BHV	Consolidated
Six months ended September 30, ($thousands)	2024 2023	2024 2023	2024 2023
Operating profit Add: Acquisition related expenses Amortization of acquired intangible assets Stock-based compensation	14,969 17,335 395 573 1,151 181 3,138 2,395	(873) 155 369 - 178 5 - -	14,096 17,490 764 573 1,329 186 3,138 2,395
Adjusted operating profit(1)	19,653 20,484	(326) 160	19,327 20,644
Adjusted Operating Margin (1)	*43%* 48%	*(2%)* 28%	*32%* 48%

(1) This is a non-IFRS financial measure. Refer to definition of the measures above.

SUMMARY OF CONSOLIDATED FINANCIAL RESULTS

SUMMARY OF CONSOLIDATED	FINANCIAL RESULTS	FINANCIAL RESULTS	FINANCIAL RESULTS
	Three months ended September 30,			Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
Total revenue	29,467	22,633	30%	59,990	43,381	38%
Cost of revenue	(5,692)	(2,493)	128%	(11,884)	(4,398)	170%
Operatingexpenses	(15,345)	(12,414)	24%	(34,010)	(21,493)	58%
Operating profit	8,430	7,726	9%	14,096	17,490	(19%)
Finance income (cost)	(311)	1,067	(129%)	276	451	(39%)
Change in fair value of contingent consideration	(2,112)	-	100%	(1,913)	-	100%
Income taxes	(2,244)	(2,277)	(1%)	(4,732)	(4,521)	5%
Net income	3,763	6,516	(42%)	7,727	13,420	(42%)

REVENUE

Software License Revenue

Software license revenue is made up of annuity/maintenance license fees and annuity license fees charged for the use of the Company’s software products and BHV’s software products respectively and are both generally for a term of one year or less. Software license revenue also includes 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 recurring revenue stream. The total annual contract value of the annuity license fee is allocated 50% to the standalone software license fee and 50% to maintenance (included in “Annuity/maintenance license revenue” and recognized over the license term).

The software license fee for CMG is recognized evenly over the term of the contract within “Annuity/maintenance license revenue”, and for BHV is recognized upfront under “Annuity license fee.” The annuity license fee is recognized in revenue when the software license is delivered to the customer at the start of the license term. As such, annuity license fee, while recurring in nature, will fluctuate due to the timing of contract renewals, and may not be indicative of the performance in a particular reporting period.

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.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

Software License Revenue

Software License Revenue
	Three months ended September 30,			Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
Annuity/maintenance licenses	18,302	17,610	4%	37,637	33,217	13%
Annuity license fee	71	-	100%	249	-	100%
Perpetual licenses	2,149	1,176	83%	4,259	3,025	41%
Total software license revenue	20,522	18,786	9%	42,145	36,242	16%
Professional services	8,945	3,847	133%	17,845	7,139	150%
Total revenue	29,467	22,633	30%	59,990	43,381	38%

Total software license revenue for the three months ended September 30, 2024, increased by 9%, compared to the same period of the previous fiscal year, of which 7% is due to the BHV acquisition and 2% is due to increases in CMG perpetual license revenue. Total software license revenue for the six months ended September 30, 2024 increased by 16%, compared to the same period of the previous fiscal year, of which 9% is due to BHV acquisition and 7% is due to increases in CMG annuity/maintenance and perpetual license revenue.

Annuity/Maintenance license revenue

Annuity/maintenance license revenue increased by 4% during the three months ended September 30, 2024, compared to the same period of the previous fiscal year, of which 8% is due to the BHV acquisition and is partially offset by a 4% annuity/maintenance license revenue decline of CMG. Annuity/maintenance license revenue increased by 13% during the six months ended September 30, 2024, compared to the same period in the previous fiscal year, of which 9% is due to the BHV acquisition and 4% is due to annuity/maintenance license growth of CMG. We continue to see a strong contribution to total software license revenue growth from energy transition customers and estimate during the three and six months ended September 30, 2024, that 19% and 24%, respectively, of total CMG segment software license revenue is related to energy transition.

Annuity license fee

Annuity license fee revenue relates to BHV. This revenue stream is expected to fluctuate quarterly depending on the timing of contract renewals as the annuity license fees are recognized in revenue when the software license is delivered. Historically, a majority of contracts renew during the third and fourth quarters.

Perpetual license revenue

Perpetual license revenue in CMG increased by 83% and 41% respectively during the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year, due to perpetual license sales generated in Asia during the three months, and the United States and Asia for the six months ended September 30, 2024, respectively.

Foreign Exchange Impact

We can observe from the tables below that the change in the exchange rate used to convert US dollar denominated revenue to Canadian dollars had a minimal negative impact on reported annuity/maintenance license revenue during the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

Three months ended September 30, 2023 Incremental License Growth (Decline) Acquired FX Impact ($ thousands)	2024

Annuity/maintenance license 17,610 (771) 1,508 (45) Annuity license fee - - 71 - Perpetual license 1,176 971 - 2
	18,302
	71
	2,149
Total software license revenue 18,786 200 1,579 (43)	20,522

Six months ended September 30, 2023 Incremental License Growth (Decline) Acquired FX Impact ($ thousands)	2024

Annuity/maintenance license 33,217 1,562 3,086 (228) Annuity license fee - - 249 - Perpetual license 3,025 1,218 - 16
	37,637
	249
	4,259
Total software license revenue 36,242 2,780 3,335 (212)	42,145

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

Software Revenue by Geographic Region

	Three months ended September 30,	Three months ended September 30,	Three months ended September 30,	Six months ended September 30,	Six months ended September 30,	Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
*Annuity/maintenance license*
Canada	3,249	3,318	(2%)	6,478	6,559	(1%)
United States	4,130	4,583	(10%)	8,748	8,837	(1%)
South America	2,417	2,477	(2%)	4,753	4,299	11%
Eastern Hemisphere(1)	8,506	7,232	18%	17,658	13,522	31%
	18,302	17,610	4%	37,637	33,217	13%
*Annuity license fee*
Canada	-	-	0%	-	-	0%
United States	37	-	100%	77	-	100%
South America	34	-	100%	67	-	100%
Eastern Hemisphere(1)	-	-	0%	105	-	100%
	71	-	100%	249	-	100%
*Perpetual license*
Canada	-	-	0%	-	115	(100%)
United States	-	-	0%	1,337	233	474%
South America	-	324	(100%)	-	324	(100%)
Eastern Hemisphere(1)	2,149	852	152%	2,922	2,353	24%
	2,149	1,176	83%	4,259	3,025	41%
*Total software license revenue*
Canada	3,249	3,318	(2%)	6,478	6,674	(3%)
United States	4,167	4,583	(9%)	10,162	9,070	12%
South America	2,451	2,801	(12%)	4,820	4,623	4%
Eastern Hemisphere(1)	10,655	8,084	32%	20,685	15,875	30%
	20,522	18,786	9%	42,145	36,242	16%

(1) Includes Europe, Africa, Asia and Australia.

Total software license revenue increased during both the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year, with the Eastern Hemisphere driving majority of the increase.

The Canadian region (representing 15% of year-to-date total software license revenue) experienced a marginal decrease in annuity/maintenance revenue compared to the same periods in the previous fiscal year. Perpetual license revenue decreased by 100% for the six months ended September 30, 2024, compared to the same period of the previous fiscal year, due to no perpetual sales being generated in the first two quarters of fiscal 2025. BHV has no customers domiciled in Canada and therefore no revenue contribution to this region.

The United States (representing 24% of year-to-date total software license revenue) experienced decreases of 10% and 1% in annuity/maintenance license revenue during the three and six months ended September 30, 2024, respectively, compared to the same periods in the previous fiscal year. BHV contributed a 5% increase in annuity/maintenance license revenue for the three and six months ended September 30, 2024. CMG annuity/maintenance license revenue decreased by 15% and 6% for the three and six months ended September 30, 2024, respectively, compared to the same periods of the previous fiscal year, primarily due to a contract not being renewed and variability associated with short-term contracts. Annuity license fee revenue increased by 100% for the three and six months ended September 30, 2024, as a result of the acquisition of BHV.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

The majority of BHV software renewals occur primarily in the third and fourth quarters of the fiscal year when the majority of annuity license fee revenue is generated. Perpetual license revenue, all attributable to CMG, remained unchanged for the three months ended September 30, 2024 whereby no perpetual license sales occurred in the current year or prior year comparative period. Perpetual license revenue increased by 474% during the six months ended September 30, 2024 compared to the same period in the previous fiscal year due to new customer license sales recorded in the first quarter of fiscal 2025.

South America (representing 12% of year-to-date total software license revenue) experienced a decrease of 2% and increase of 11% in annuity/maintenance license revenue during the three and six months ended September 30, 2024, respectively, compared to the same periods in the previous fiscal year. BHV contributed 10% and 14% of the increase in annuity/maintenance license revenue for the three and six months ended September 30, 2024, respectively. CMG annuity/maintenance license revenue decreased by 12% and 3% for the three and six months ended September 30, 2024, respectively, compared to the same periods of the previous fiscal year due to delay in negotiation of renewals with some existing customers. Annuity license fee revenue increased by 100% for the three and six months ended September 30, 2024, as a result of the acquisition of BHV. There have been no perpetual license sales in the three and six months ended September 30, 2024.

The Eastern Hemisphere (representing 49% of year-to-date total software license revenue) experienced increases of 18% and 31% in annuity/maintenance license revenue during the three and six months ended September 30, 2024, respectively, compared to the same periods in the previous fiscal year. BHV contributed 12% and 14% of the increase in annuity/maintenance license revenue for the three and six months ended September 30, 2024. CMG annuity/maintenance license revenue increased by 6% and 17% for the three and six months ended September 30, 2024, respectively, compared to the same periods in the previous fiscal year, primarily due to new customers, increased license fees and revenue recognized in the current period for products provided in previous quarters primarily in Asia. Annuity license fee revenue increased by nil and 100% for both the three and six months ended September 30, 2024, respectively, as a result of the acquisition of BHV. Perpetual license sales increased by 152% and 24% for the three and six months ended September 30, 2024, respectively, compared to the same periods in the previous fiscal year, primarily due to an increase in perpetual sales in Asia. The increases in both annuity/maintenance and perpetual license revenue in Asia for the periods were largely due to licenses delivered to a customer in a prior period, for which the collection of consideration was determined to be probable in the current period due to a negotiated payment schedule which commenced during the three months ended September 30, 2024.

Consolidated Quarterly Software License Revenues

As footnoted in the Consolidated Quarterly Software License Revenue graph, during 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 the revenue recognition criteria being satisfied only when a contract has been fully executed and collection of consideration is probable. When collection of consideration is not probable, the Company recognizes revenue for consideration received only once substantially all consideration due under the contract is collected and the relevant performance obligations are fulfilled. The dollar magnitude of such contracts may be significant to the quarterly comparatives of our annuity/maintenance license revenue stream. 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. Please refer to the yellow bars and the footnotes in the following graph:

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

($ thousands)

==> picture [500 x 318] intentionally omitted <==

(1) Q3 and Q4 of fiscal 2020 include $0.2 million, and $0.5 million, respectively, in revenue that pertains to usage of CMG’s annuity/maintenance products in prior quarters.
(2) Q1, Q2, Q3 and Q4 of fiscal 2021 include $0.2 million, $0.2 million, $nil, and $1.1 million, respectively, in revenue that pertains to usage of CMG’s annuity/maintenance products in prior quarters.

(3) Q1, Q2, Q3 and Q4 of fiscal 2022 include $nil, $0.5 million, $nil, and $0.8 million, respectively, in revenue that pertains to usage of CMG’s annuity/maintenance products in prior quarters.

(4) Q1, Q2, Q3 and Q4 of fiscal 2023 includes $0.2 million, $0.3 million, $0.3 million, and $0.4 million, respectively, in revenue that pertains to usage of CMG’s annuity/maintenance products in prior quarters.

(5) Q1, Q2, Q3, and Q4 of fiscal 2024 include $0.1 million, $0.4 million, $0.2 million, and $0.7 million, respectively, in revenue that pertains to usage of CMG’s annuity/maintenance products in prior quarters.

(6) Q1 and Q2 of fiscal 2025 include $1.2 million and $0.5 million, respectively, in revenue that pertains to usage of CMG”s annuity/maintenance products in prior quarters.

Deferred Revenue

Deferred Revenue
($thousands)	Fiscal 2025	Fiscal 2024	Fiscal 2023	$change	% change
Deferred revenue at:
Q1 (June 30)	30,890	26,616		4,724	16%
Q2 (September 30)	32,274	32,339		(65)	0%
Q3 (December 31)		27,089	26,717	372	1%
Q4(March 31)		41,120	34,797	6,323	18%

(1) Q1, Q2, Q3 and Q4 of fiscal 2024 include $nil, $1.4 million, $3.5 million, and $4.4 million, respectively, in deferred revenue that pertains to BHV.

(2) Q1 and Q2 of fiscal 2025 include $3.3 million and $1.9 million, respectively, in deferred revenue that pertains to BHV.

The Company’s deferred revenue consists primarily of amounts for prepaid licenses. Annuity/maintenance revenue is deferred and recognized ratably over the 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.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

The above table illustrates the normal trend in the deferred revenue balance from the beginning of the calendar year (which corresponds with Q4 of our fiscal year), when most renewals occur, to the end of the calendar year (which corresponds with Q3 of our fiscal year). Our fourth quarter corresponds with the beginning of the fiscal year for most oil and gas companies, representing a time when they enter a new budget year and sign/renew their contracts.

Professional Services Revenue

Professional services revenue consists of specialized consulting, training, and contract research activities. CMG performs consulting and contract research activities on an ongoing basis. 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 customer companies. BHV also performs consulting services related to subsurface interpretations and product development related activities including building custom software for their customers. The majority of BHV professional services revenue relates to one customer contract.

Professional services revenue for the three and six months ended September 30, 2024, was $8.9 million and $17.9 million which represents increases of 133% and 150%, respectively, compared to the same periods of the previous fiscal year. The acquisition of BHV contributed 134% and 151% of the increase for the three and six months ended September 30, 2024, respectively. CMG’s professional services were relatively consistent with the same periods of the previous fiscal year.

COST OF REVENUE

Cost of revenue primarily consists of direct employee costs, external consultants, overhead costs associated with customer support, training, and consulting, and public cloud hosting applications. These costs are generally related to headcount and are driven by management’s decision to add customer success and consulting capacity. In general, these costs fluctuate as a percentage of revenue as the Company adds headcount to support increased demand for our software and consulting services.

	Three months ended September 30,	Three months ended September 30,	Three months ended September 30,	Six months ended September 30,	Six months ended September 30,	Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
Cost of revenue(1) (2)	5,692	2,493	128%	11,884	4,398	170%

(1) Depreciation and amortization related to property and equipment and right of use assets is $0.1 and $0.2 million for the three and six months ended September 30, 2024, respectively, and $0.1 million and $0.2 million for the three and six months ended September 30, 2023, respectively.

(2) Stock based compensation is $0.1 million and $0.3 million for the three and six months ended September 30, 2024, respectively, and $0.3 million for the three and six months ended September 30, 2023.

Cost of revenue increased by 128% and 170% for the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year of which increases from the acquisition of BHV contributed 126% and 153%, respectively. CMG contributed to an increase of 2% and 17%, respectively, for the three and six months ended September 30, 2024, primarily due to headcount related costs and increased travel costs.

OPERATING EXPENSES

Sales and marketing

Sales and marketing expenses are comprised primarily of employee salaries, commissions, benefits and stock-based compensation, as well direct costs related to the delivery of marketing programs and events. Sales and marketing expenses also include travel-related expenses and corporate overhead allocations. We plan to continue to expand sales and marketing efforts to attract new customers, retain existing customers and increase revenues from both new and existing customers.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

Research and development

Research and development expenses are comprised primarily of personnel expenses including employee salaries, benefits and stock-based compensation, product-related expenses including product management, product research and development, and other corporate overhead allocations off-set by certain tax benefits realized through the Canadian Scientific Research and Experimental Development Tax Credit program (“SR&ED”). We continue to invest in our research and development program by adding new features and functionality to our products, maintaining our expansive artifact infrastructure, and delivering new products to market.

General and administrative

General and administrative expenses are comprised primarily of personnel expenses including employee salaries, benefits, and stock-based compensation expense for our administrative, finance, legal, information technology, and people and culture teams, allocated rent expenses, travel and travel related expenses, and general office and administrative expenses, and professional service expenses.

The below table provides a reconciliation of operating expenses to adjusted operating expenses:

	Three months ended September 30,	Three months ended September 30,	Three months ended September 30,	Six months ended September 30,	Six months ended September 30,	Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
Sales and marketing(1)(2)	4,229	3,384	25%	9,160	5,739	60%
Research and development(1)(2)	6,428	4,767	35%	14,673	8,819	66%
General and administrative(1)(2)	4,688	4,263	10%	10,177	6,935	47%
Operating expenses	15,345	12,414	24%	34,010	21,493	58%
*% of total revenue*	*52%*	55%		*57%*	50%
Acquisition related expenses	(576)	(573)	1%	(764)	(573)	33%
Amortization of acquired intangibles	(664)	(129)	415%	(1,329)	(186)	615%
Stock-based compensation	(156)	(2,017)	(92%)	(2,830)	(2,105)	34%
Adjusted operating expenses(3)	13,949	9,695	44%	29,087	18,629	56%
*% of total revenue*	*47%*	43%		*48%*	43%
Direct employee costs(3)	9,335	8,538	9%	22,990	14,696	56%
Other corporate cost(3)	6,010	3,876	55%	11,020	6,797	62%
	15,345	12,414	24%	34,010	21,493	58%

(1) Included in sales and marketing, research and development, and general and administrative expenses is depreciation related to property and equipment, right of use assets, and amortization of acquired intangible assets of $0.2 million, $1.1 million, $0.6 million, respectively, for the three months ended September 30, 2024 (three months ended September 30 2023, $0.1 million, $0.6 million, $0.2 million, respectively) and $0.3 million, $2.2 million, $1.2 million, respectively, for the six months ended September 30, 2024 (six months ended September 30 2023, $0.2 million, $1.2 million, $0.4 million, respectively).

(2) Included in sales and marketing, research and development, and general and administrative expenses is stock based compensation expense of ($0.1) million, $0.1 million, $0.1 million, respectively, for the three months ended September 30, 2024 (three months ended September 30, 2023, $0.3 million, $0.7 million, $1.0 million respectively) and $1.0 million, $0.7 million, $1.1 million, respectively, for the six months ended September 30, 2024 (six months ended September 30, 2023, $0.2 million, $0.8 million, $1.1 million respectively).

(3) This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.

Operating expenses for the three and six months ended September 30, 2024, increased by 24% and 58% compared to the same periods of the previous fiscal year. Adjusted total operating expenses increased by 44% and 56% for the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year. The acquisition of BHV contributed 38% and 41% of the increase in total adjusted operating costs for the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year, respectively.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

CMG’s total adjusted operating expenses increased by 6% and 15% for the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year, respectively, primarily due to an increase in headcount and headcount related costs including variable compensation, increased professional service fees, and increased travel related to attendance at trade shows to further drive organizational success.

Sales and marketing

Sales and marketing expenses for the three and six months ended September 30, 2024, increased by 25% and 60%, respectively, compared to the same periods of the previous fiscal year. For the three and six months ended September 30, 2024, BHV contributed 25% and 28%, respectively, of the increase in sales and marketing expenses. CMG sales and marketing expenses remained consistent and increased by 32%, respectively, for the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year. Approximately 45% of the increase in sales and marketing expenses at CMG for the six months ended September 30, 2024, relates to stock-based compensation expense, and the remaining increase primarily relates to increased headcount and headcount-related costs as we grow our sales team, increased variable performance-based compensation and agent fees to support increased revenue.

Research and development

Research and development expenses for the three and six months ended September 30, 2024 increased by 35% and 66%, respectively, compared to the same periods of the previous fiscal year. For the three and six months September 30, 2024, BHV contributed 39% and 46%, respectively, of the increase in research and development expenses. CMG’s research and development expenses decreased by 4% and increased by 20% for the three and six months ended September 30, 2024, respectively, compared to the same periods of the previous fiscal year. The 4% decrease in CMG’s research and development expenses for the three months ended September 30, 2024 is primarily due to a reduction in stock-based compensation expenses, partially offset by increased amortization related to acquired intangible assets. The 20% increase in CMG’s research and development expenses for the six months ended September 30, 2024, is due to increased amortization related to acquired intangible assets, increased headcount related costs including increased salaries, severance and variable compensation, and increased enabling technology costs to support client service initiatives.

General and administrative

General and administrative expenses for the three and six months ended September 30, 2024, increased by 10% and 47%, respectively, compared to the same periods of the previous fiscal year. For the three and six months ended September 30, 2024, BHV contributed 29% and 37%, respectively, of the increase in general and administrative expenses. CMG general and administrative expenses decreased by 19% and increased by 10% for the three and six months ended September 30, 2024, respectively, compared to the same periods of the previous fiscal year. The 19% decrease in CMG’s general and administrative expenses for the three months ended September 30, 2024, is primarily due to a decrease in stock-based compensation expense. The 10% increase in CMG’s general and administrative expenses for the six months ended September 30, 2024, is primarily due to an increase in headcount and headcount related costs.

Direct employee costs

As a technology company, the Company’s largest investment is its people, and approximately 68% of total operating expenses relate to direct employee costs during the six months ended September 30, 2024. At September 30, 2024, CMG Group’s fulltime equivalent staff complement was 291 employees and consultants (CMG – 193; BHV – 98); (September 30, 2023 – CMG – 185; BHV – 111).

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

The below table provides a reconciliation of direct employee costs to adjusted direct employee costs:

	Three months ended September 30,	Three months ended September 30,	Three months ended September 30,	Six months ended September 30,	Six months ended September 30,	Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
Direct employee costs	9,335	8,538	9%	22,990	14,696	56%
Stock-based compensation	(156)	(2,017)	(92%)	(2,830)	(2,105)	34%
Adjusted direct employee costs(1)	9,179	6,521	41%	20,160	12,591	60%

(1) This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section. Adjusted direct employee costs exclude stock-based compensation expenses.

For the three and six months ended September 30, 2024, adjusted direct employee costs increased by 41% and 60%, respectively, compared to the same periods of the previous fiscal year. For the three and six months ended September 30, 2024, BHV contributed 36% and 42%, respectively, of the increase in adjusted direct employee costs. CMG increased by 5% and 18% for the three and six months ended September 30, 2024, respectively, compared to the same periods of the previous fiscal year primarily due to salary inflation, severance, and variable compensation costs.

Other Corporate costs

The below table provides a reconciliation of other corporate costs to adjusted other corporate costs:

	Three months ended September 30,	Three months ended September 30,	Three months ended September 30,	Six months ended September 30,	Six months ended September 30,	Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
Other corporate costs	6,010	3,876	55%	11,020	6,797	62%
Acquisition-related costs	(576)	(573)	1%	(764)	(573)	33%
Amortization of acquired intangible assets	(664)	(129)	415%	(1,329)	(186)	615%
Adjusted other corporate costs(1)	4,770	3,174	50%	8,927	6,038	48%

(1) This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section. Adjusted other corporate costs exclude acquisition-related costs and amortization of acquired intangible assets.

For the three and six months ended September 30, 2024, adjusted other corporate costs increased by 50% and 48%, respectively, compared to the same periods of the previous fiscal year. For the three and six months ended September 30, 2024, BHV contributed 42% and 40%, respectively of the increase in total adjusted other corporate costs. CMG other corporate costs increased by 8% for both the three and six months ended September 30, 2024, compared to the same periods of the previous fiscal year. The increase of 8% at CMG for the three months ended September 30, 2024, compared to the same period of the previous fiscal year, primarily relates to increased travel for internal training initiatives, attendance at conferences/tradeshows, and professional services to support growth through acquisitions. The increase of 8% at CMG for the six months ended September 30, 2024 compared to the same period of the previous fiscal year, primarily relates to the same reasons that are impacting the three months, in addition to increased agent commissions and increased enabling technology costs to support client service initiatives.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

FOREIGN EXCHANGE

The Company is impacted by foreign exchange fluctuations, as 79% of our revenue for the six months ended September 30, 2024 (2023 – 69%) is denominated in US dollars, whereas 53% (2023 – 27%) of our total costs are denominated in US dollars.

The following chart shows the exchange rates used to translate the Company’s US dollar-denominated working capital at September 30, 2024, 2023 and 2022 and the average exchange rate used to translate income statement expense items during the three months ended September 30, 2024, 2023 and 2022:

			Six-month
CDN$to US$	At June 30	At September 30	trailingaverage
2022	0.7744	0.7302	0.7691
2023	0.7545	0.7364	0.7427
2024	0.7310	0.7395	0.7323

CMG Group recorded foreign exchange losses of $0.6 million and $0.4 million for the three and six months ended September 30, 2024, respectively, due to the weakening of the US dollar compared to Q1 of fiscal 2025 and Q4 of fiscal 2024, which negatively affected the valuation of the US dollar - denominated portion of the Company’s working capital.

INCOME AND OTHER TAXES

Our consolidated effective tax rate for the three months ended September 30, 2024 is 38% (2023 – 25.2%), whereas the Canadian statutory tax rate for each of 2025 and 2024 fiscal years is 23%. The difference between the effective rate and the statutory rate is primarily attributed to a prior year adjustment relating to the acquisition of BHV, the non-tax deductibility of stock-based compensation expense, and the add back of the change in fair value of contingent consideration.

The benefit recorded in CMG’s books on the scientific research and experimental development (“SR&ED”) investment tax credit program impacts deferred income taxes. The investment tax credit earned in the current fiscal year reduces income taxes otherwise payable for the current fiscal year but 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.

QUARTERLY PERFORMANCE

The following table summarizes selected results for the eight most recently completed quarters:

	Fiscal 2023(2) Fiscal 2024(3) Fiscal 2025(4) ($ thousands, unless otherwise stated) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
	Annuity/maintenance license 15,533 15,803 15,607 17,610 18,814 19,661 19,335 18,302 Annuity license fee - - - - 3,846 1,142 178 71 Perpetual license 518 1,556 1,849 1,176 584 2,130 2,110 2,149
	Total software license revenue 16,051 17,359 17,456 18,786 23,244 22,933 21,623 20,522 Professional services revenue 3,341 2,906 3,292 3,847 9,763 9,358 8,900 8,945
	Total revenue 19,392 20,265 20,748 22,633 33,007 32,291 30,523 29,467 Operating profit 8,435 6,909 9,764 7,726 8,217 8,277 5,666 8,430 Operating profit Margin (%) 43% 34% 47% 34% 25% 26% 19% *29%* Net income for the period 6,348 5,226 6,904 6,516 5,610 7,229 3,964 3,763 Adjusted EBITDA(1) 9,498 8,520 9,948 10,718 12,272 10,219 9,437 9,937 Adjusted EBITDA Margin(1)% 49% 42% 48% 47% 37% 32% 31% *34%* Free Cash Flow(1) 7,545 5,396 7,463 11,028 7,290 9,469 5,679 6,096
	Per share amounts – ($/share) Earnings per share (EPS) – basic 0.08 0.07 0.09 0.08 0.07 0.09 0.05 0.05 Earnings per share (EPS) – diluted 0.08 0.06 0.08 0.08 0.07 0.09 0.05 0.05 Cash dividends declared and paid 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 Free Cash Flow per share – basic(1) 0.09 0.07 0.09 0.14 0.09 0.12 0.07 0.07

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

(1) This is a non-IFRS financial measure. See the “Non-IFRS Financial Measures” section.
(2) Q3, and Q4 of fiscal 2023 include $0.3 million, and $0.4 million, respectively, of annuity/maintenance revenue that pertains to usage of CMG’s products in prior quarters.
(3) Q1, Q2, Q3, and Q4 of fiscal 2024 include $0.1 million, $0.4 million, $0.2 million, $0.7 million, respectively, of annuity/maintenance revenue that pertains to usage of CMG’s annuity/maintenance products in prior quarters.
(4) Q1 and Q2 of fiscal 2025 includes $1.2 million and $0.5 million, respectively, in annuity/maintenance license revenue that pertains to usage of CMG’s annuity/maintenance products in prior quarters.

The acquisition of BHV in the prior year created a new revenue stream “annuity license fee” and added incremental revenues to annuity/maintenance license revenue and professional services revenue. The above table illustrates the normal trend in annuity/maintenance license revenue from the beginning of the calendar year (which corresponds with Q4 of our fiscal year), when most renewals occur, to the end of the calendar year (which corresponds with Q3 of our fiscal year). Our fourth quarter corresponds with the beginning of the fiscal year for most oil and gas companies, representing a time when they enter a new budget year and sign/renew their contracts. A significant portion of BHV annuity license fee revenue will occur during the third and fourth quarters when the majority of renewals take place, resulting in a significant decrease in annuity license fee revenue for the three and six months ended September 30, 2024. This seasonality has a similar impact on both operating profit and net income as seen in the above table.

The growth and future success of our business depends on many factors and variables. While each of these items present significant opportunities for our business, they also present challenges which are discussed in the 2024 financial report and in the “Risk Factors” section of CMG’s Annual Information Form dated May 22, 2024, which is available under the Company’s profile on SEDAR+ at www.sedarplus.ca.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

==> picture [432 x 243] intentionally omitted <==

==> picture [283 x 7] intentionally omitted <==

LIQUIDITY AND CAPITAL RESOURCES

	Three months ended September 30,	Three months ended September 30,	Three months ended September 30,	Six months ended September 30,	Six months ended September 30,	Six months ended September 30,
	2024	2023	% change	2024	2023	% change
($thousands)
Cash, beginning of period	69,092	64,242	8%	63,083	66,850	(6%)
Cash provided by (used in):
Operating activities	(2,455)	13,038	(119%)	5,768	14,225	(59%)
Financing activities	(4,390)	(5,954)	26%	(6,960)	(9,704)	28%
Investing activities	(236)	(23,101)	99%	(329)	(23,146)	99%
Effect of foreign exchange on cash	(638)	-	100%	(189)	-	100%
Cash, end of period	61,373	48,225	27%	61,373	48,225	27%

At September 30, 2024, CMG Group had $61.4 million in cash, no borrowings, and access to a $2.0 million line of credit with its principal banker, of which $0.7 million is available for use. The Company’s primary non-operating use of cash was for dividend payments and repayment of lease liabilities. Management believes that the Company has sufficient capital resources to meet its operating and capital expenditure needs.

During the six months ended September 30, 2024, 17.3 million shares of the Company’s public float were traded on the TSX. As at September 30, 2024 the Company’s market capitalization based upon its September 30, 2024 closing price of $11.37 was $931.8 million.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

OPERATING ACTIVITIES

Cash provided by operating activities decreased by $15.5 million during the three months ended September 30, 2024, compared to the same period of the previous fiscal year. Funds flow from operations decreased by $4.4 million from the comparative quarter, primarily due to negative funds flow from operations generated by BHV and significant cash-settled equity compensation during the period. Cash provided by operating activities was further offset by $9.6 million in non-cash working capital, primarily driven by the timing of when sales are recorded and when the resulting receivables are collected and an increase in deferred revenue.

Cash provided by operating activities decreased by $8.5 million during the six months ended September 30, 2024, compared to the same period of the previous fiscal year. Funds flow from operations decreased by $5.8 million from the comparative year-todate period, primarily due to reduced net income. Cash provided by operating activities was further reduced by $7.8 million in non-cash working capital, primarily driven by the timing of when sales are recorded and when the resulting receivables are collected and a prior year adjustment relating to the acquisition of BHV.

FINANCING ACTIVITIES

Cash used in financing activities decreased by $1.5 million during the three months ended September 30, 2024, compared to the same period of the previous fiscal year. The decrease is primarily due to the repayment of the acquired line of credit from Bluware from the prior year that didn’t recur in the current year, partially offset by an increase in repayment of lease liabilities as a result of the acquisition of BHV.

Cash used in financing activities decreased by $2.7 million during the six months ended September 30, 2024, compared to the same period of the previous fiscal year. The decrease is primarily due to the repayment of the acquired line of credit from Bluware from the prior year that didn’t recur in the current year, an increase in proceeds received from the issuance of shares related to option exercises, partially offset by an increase in repayment of lease liabilities as a result of the acquisition of BHV.

On November 12, 2024, CMG Group announced the payment of a quarterly dividend of $0.05 per share on the Company’s common shares. The dividend will be paid on December 13, 2024, to shareholders of record at the close of business on December 5, 2024. Decisions with respect to dividend payments are made by the Board of Directors on a quarterly basis and take into account market conditions and the financial performance of the Company.

INVESTING ACTIVITIES

Cash used in investing activities for the three and six months ended September 30, 2024 consist of capital asset additions, all of which are funded internally. Our capital budget for fiscal 2025 is $1.7 million, which is intended to expand our existing computer infrastructure and improve R&D infrastructure to support development initiatives.

COMMITMENTS, OFF BALANCE SHEET ITEMS AND TRANSACTIONS WITH RELATED PARTIES

CMG, in partnership with Shell Global Solutions International B.V. (“Shell”) at present, and also in partnership with Petroleo Brasileiro S.A. historically, is the developer of CoFlow, the newest generation of reservoir and production system simulation software.

On January 1, 2017, Shell and CMG entered into an agreement (the “CoFlow Agreement”) for an initial five-year term, whereby CMG would be responsible for the research and development costs of CoFlow and Shell would be responsible for providing a contribution for the continuing development of the software.

On December 21, 2020, the CoFlow Agreement was amended when Shell exercised its right to request a five-year term extension, commencing January 1, 2022. All other terms and conditions in the CoFlow Agreement, including any related amendments, remain unchanged and in full force and effect during the extended term. In September 2021, CMG and Shell agreed that CMG would add and/or allocate up to six additional full-time employees in order to accelerate CoFlow development and support targeted CoFlow deployments, and Shell’s contribution would increase accordingly.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

==> picture [60 x 21] intentionally omitted <==

The Company enters into transactions with related parties in the normal course of business with its wholly owned subsidiaries which are eliminated upon consolidation. For a list of wholly owned subsidiaries, refer to Note 23 Subsidiaries in the audited consolidated 2024 financial statements There were no other related party transactions to disclose for the three and six months ended September 30, 2024.

CMG Group has only minor ongoing material contractual obligations other than prepaid licenses, which are reflected as deferred revenue on the statement of financial position, and contractual obligations for office leases, which are estimated to be as follows as at September 30, 2024:

as at September 30, 2024:
	Undiscounted lease
(thousands of $)	liability payments	Operatingcosts	Total commitments
Less than one year	4,024	1,288	5,312
Between one and five years	16,286	5,246	21,532
More than fiveyears	30,707	8,484	39,191
	51,017	15,018	66,035

OUTSTANDING SHARE DATA

The following table represents the number of common shares, stock options, restricted share units and performance share units outstanding:

As at November 12, 2024
(thousands)
Common shares	81,950
Stock options	4,080
Restricted share units(1)	220
Performance share units(1)	86

(1) Upon vesting, restricted share units and performance share units can be exchanged for common shares of the Company or surrendered for cash.

The maximum number of common shares that may be reserved for issuance under the Company’s security-based compensation plans is limited to 10% of the issued and outstanding common shares. Based on this calculation, at November 12, 2024, CMG Group could reserve up to 8,194,952 common shares for issuance under its security-based compensation plans.

BUSINESS RISKS, CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

These remain unchanged from the factors detailed in CMG’s 2024 Financial Report.

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. This instrument requires us to disclose in our interim MD&A any weaknesses in or changes to our internal control over financial reporting during the period that may have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We confirm that no such weaknesses were identified in, or changes were made to, internal controls over financial reporting during the three months ended September 30, 2024, except for the matter described below. During the 2025 fiscal year, we continue to monitor and review our controls and procedures.

CMG previously excluded controls, policies and procedures from BHV acquired on September 25, 2023, from the design of DC&P and evaluation of ICFR as permitted under Section 3.3(1)(b) of NI 52-109. We completed the evaluation of design of internal controls over financial reporting of Bluware during the second quarter of fiscal 2025.

Computer Modelling Group Ltd. Q2 25

Management Discussion & Analysis

AI assistant

Computer Modelling Group Ltd. — Interim / Quarterly Report 2025

43491_rns_2024-11-12_2ea57ba7-ffeb-4d5d-9680-3beb5bf1ffb9.pdf

Management’s Discussion and Analysis Q2 2025

CEO Letter to Shareholders

Q2 2025

Solutions

Acquisition Strategy

In Closing

SECOND QUARTER 2025 CONSOLIDATED HIGHLIGHTS

Select financial highlights

SECOND QUARTER YEAR TO DATE 2025 CONSOLIDATED HIGHLIGHTS

Second Quarter Overview

SUMMARY OF FINANCIAL PERFORMANCE

MANAGEMENT’S DISCUSSION AND ANALYSIS

FORWARD-LOOKING INFORMATION

CORPORATE PROFILE

BUSINESS OVERVIEW

Significant Events

Acquisition of Sharp Reflections GmbH

Business Model

Annuity License Agreements

Perpetual License Agreements

NON-IFRS FINANCIAL AND SUPPLEMENTARY FINANCIAL MEASURES

Adjusted EBITDA and Adjusted EBITDA Margin

Free Cash Flow Reconciliation to Funds Flow from Operations

Adjusted operating expenses, direct employee and other corporate costs

Adjusted Operating Profit and Adjusted Operating Profit Margin

SUMMARY OF CONSOLIDATED FINANCIAL RESULTS

REVENUE

Software License Revenue

Software License Revenue

Annuity/Maintenance license revenue

Annuity license fee

Perpetual license revenue

Foreign Exchange Impact

Software Revenue by Geographic Region

Consolidated Quarterly Software License Revenues

Deferred Revenue

Professional Services Revenue

COST OF REVENUE

OPERATING EXPENSES

Sales and marketing

Research and development

General and administrative

Sales and marketing

Research and development

General and administrative

Direct employee costs

Other Corporate costs

FOREIGN EXCHANGE

INCOME AND OTHER TAXES

QUARTERLY PERFORMANCE

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES

FINANCING ACTIVITIES

INVESTING ACTIVITIES

COMMITMENTS, OFF BALANCE SHEET ITEMS AND TRANSACTIONS WITH RELATED PARTIES

OUTSTANDING SHARE DATA

BUSINESS RISKS, CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

More from Computer Modelling Group Ltd.

Computer Modelling Group Ltd. Interim / Quarterly Report 2025