Computer Modelling Group Announces Year End Results

CALGARY, ALBERTA--(Marketwired - May 23, 2013) - Computer Modelling Group Ltd. ("CMG" or the "Company") (CMG.TO) is very pleased to report our financial results for the fiscal year ended March 31, 2013.

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") for Computer Modelling Group Ltd. ("CMG," the "Company," "we" or "our"), presented as at May 22, 2013, should be read in conjunction with the audited consolidated financial statements and related notes of the Company for the years ended March 31, 2013 and 2012. Additional information relating to CMG, including our Annual Information Form, can be found at www.sedar.com. The financial data contained herein have been prepared in accordance with International Financial Reporting Standards ("IFRS") and, unless otherwise indicated, all amounts in this report are expressed in Canadian dollars and rounded to the nearest thousand.

CORPORATE PROFILE

CMG is a computer software technology company serving the oil and gas industry. The Company is a leading supplier of advanced processes reservoir modelling software with a blue chip client base of international oil companies and technology centers in over 50 countries. The Company also provides professional services consisting of highly specialized support, consulting, training, and contract research activities. CMG has sales and technical support services based in Calgary, Houston, London, Caracas, Dubai and Bogota. CMG's Common Shares are listed on the Toronto Stock Exchange ("TSX") and trade under the symbol "CMG".

ANNUAL PERFORMANCE
($ thousands, unless otherwise stated) March 31, 2013 March 31, 2012 March 31, 2011
Annuity/maintenance licenses 54,555 42,858 32,709
Perpetual licenses 8,406 12,724 11,045
Software licenses 62,961 55,582 43,754
Professional services 5,659 5,452 8,073
Total revenue 68,620 61,034 51,827
Operating profit 34,290 31,604 25,677
Operating profit (%) 50 % 52 % 50 %
EBITDA(1) 35,829 32,831 26,714
Net income for the year 24,822 23,391 17,166
Cash dividends declared and paid 27,905 20,499 16,971
Total assets 83,421 74,892 58,689
Total shares outstanding 38,129 37,307 36,427
Trading price per share at March 31 21.09 15.90 12.98
Market capitalization at March 31 804,130 593,170 472,820
Per share amounts - ($/share)
Earnings per share - basic 0.66 0.63 0.48
Earnings per share - diluted 0.64 0.62 0.47
Cash dividends declared and paid 0.74 0.555 0.47
(1) EBITDA is defined as net income before adjusting for depreciation expense, finance income, finance costs, and income and other taxes.
See "Non-IFRS Financial Measures".
QUARTERLY PERFORMANCE
Fiscal 2012(1) Fiscal 2013(2)
($ thousands, unless otherwise stated) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Annuity/maintenance licenses 8,997 9,308 12,056 12,497 13,179 12,012 14,004 15,359
Perpetual licenses 5,391 1,596 2,321 3,416 2,070 2,671 1,365 2,300
Software licenses 14,388 10,904 14,377 15,913 15,249 14,683 15,369 17,659
Professional services 1,551 1,078 1,521 1,302 1,216 1,390 1,433 1,620
Total revenue 15,939 11,982 15,898 17,215 16,465 16,073 16,802 19,279
Operating profit 9,092 5,226 8,093 9,193 8,105 8,032 8,276 9,877
Operating profit (%) 57 44 51 53 49 50 49 51
EBITDA 9,366 5,508 8,414 9,543 8,423 8,425 8,687 10,294
Profit before income and other taxes 9,240 6,096 8,184 9,104 8,577 7,703 8,556 10,314
Income and other taxes 2,577 1,778 2,394 2,484 2,487 2,342 2,437 3,061
Net income for the period 6,663 4,318 5,790 6,620 6,090 5,361 6,119 7,253
Cash dividends declared and paid 7,519 4,053 4,079 4,848 9,736 6,020 6,050 6,099
Per share amounts - ($/share)
Earnings per share - basic 0.18 0.12 0.16 0.18 0.16 0.14 0.16 0.19
Earnings per share - diluted 0.18 0.11 0.15 0.17 0.16 0.14 0.16 0.19
Cash dividends declared and paid 0.205 0.11 0.11 0.13 0.26 0.16 0.16 0.16
(1) Q1, Q2, Q3 and Q4 of fiscal 2012 include $0.3 million, $0.04 million, $2.6 million and $2.7 million, respectively, in revenue that pertains to usage of CMG's products in prior quarters.
(2) Q1, Q2, Q3 and Q4 of fiscal 2013 include $2.1 million, $0.2 million, $1.8 million and $2.6 million, respectively, in revenue that pertains to usage of CMG's products in prior quarters.

Highlights

During the year ended March 31, 2013, as compared to the prior fiscal year, CMG:

  • Increased annuity/maintenance revenue by 27%
  • Increased operating profit by 8%
  • Increased spending on research and development by 18%
  • Increased EBITDA by 9%
  • Increased total dividends declared and paid by 33%
  • Realized earnings per share of $0.66, representing a 5% increase
Revenue
For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Software licenses 17,659 15,913 1,746 11 %
Professional services 1,620 1,302 318 24 %
Total revenue 19,279 17,215 2,064 12 %
Software license revenue - % of total revenue 92 % 92 %
Professional services - % of total revenue 8 % 8 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Software licenses 62,961 55,582 7,379 13 %
Professional services 5,659 5,452 207 4 %
Total revenue 68,620 61,034 7,586 12 %
Software license revenue - % of total revenue 92 % 91 %
Professional services - % of total revenue 8 % 9 %

CMG's revenue is comprised of software license sales, which provide the majority of the Company's revenue, and fees for professional services.

Total revenue increased by 12% for the three months ended March 31, 2013, compared to the same period of the previous fiscal year, mainly due to an increase in software license sales driven by the growth in annuity/maintenance license sales. Professional services also contributed to the overall growth in our quarterly total revenue.

Similarly, total revenue increased by 12% in the year ended March 31, 2013, compared to the previous fiscal year, primarily as a result of the increase in software license sales led by the increase in annuity/maintenance revenue, and a slight increase in fees for professional services earned during the current fiscal year.

SOFTWARE LICENSE REVENUE

Software license revenue is made up of annuity/maintenance license fees charged for the use of the Company's software products which is generally for a term of one year or less and perpetual software license sales, whereby the customer purchases the-then-current version of the software and has the right to use that version in perpetuity. Annuity/maintenance license fees have historically had a high renewal rate and, accordingly, provide a reliable revenue stream while perpetual license sales are more variable and unpredictable in nature as the purchase decision and its timing fluctuate with the customers' needs and budgets. The majority of CMG's customers who have acquired perpetual software licenses subsequently purchase our maintenance package to ensure ongoing product support and access to current versions of CMG's software.

For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Annuity/maintenance licenses 15,359 12,497 2,862 23 %
Perpetual licenses 2,300 3,416 (1,116 ) -33 %
Total software license revenue 17,659 15,913 1,746 11 %
Annuity/maintenance as a % of total software license revenue 87 % 79 %
Perpetual as a % of total software license revenue 13 % 21 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Annuity/maintenance licenses 54,555 42,858 11,697 27 %
Perpetual licenses 8,406 12,724 (4,318 ) -34 %
Total software license revenue 62,961 55,582 7,379 13 %
Annuity/maintenance as a % of total software license revenue 87 % 77 %
Perpetual as a % of total software license revenue 13 % 23 %

Total software license revenue grew by 11% in the three months ended March 31, 2013, compared to the same period of the previous fiscal year, due to the increase in annuity/maintenance license revenue offset by a decrease in perpetual sales. Similarly, total software license revenue grew by 13% for the year ended March 31, 2013, compared to the previous fiscal year, as a result of the increase in annuity/maintenance revenue stream offset by the decrease in perpetual license sales.

CMG's annuity/maintenance license revenue increased by 23% and 27% during the three months and year ended March 31, 2013, respectively, compared to the same periods of last year. These increases were driven by sales to new and existing clients as well as an increase in maintenance revenue tied to perpetual sales generated in the current and previous fiscal years.

All of our regions experienced strong growth in annuity/maintenance revenue during both the three months and year ended March 31, 2013, for the reasons described above, but the most significant growth came from our Canadian market.

Our annuity/maintenance revenue is impacted by the revenue recognition on a multi-year contract for which revenue recognition criteria are fulfilled only at the time of the receipt of funds (see the discussion about revenue earned in the current period that pertains to usage of products in prior quarters above the "Quarterly Software License Revenue" graph). The variability of the amounts of the payments received and the timing of such payments may skew the comparison of the recorded annuity/maintenance revenue amounts between periods. The amounts received from this particular client and recognized during the three months ended March 31, 2013, are not significantly different from the amounts received and recognized in the same period of the previous fiscal year. If we were to adjust our annuity/maintenance license revenue, by removing revenue from this one customer from the years ended March 31, 2013 and 2012, we would see that the annuity/maintenance sales have grown by 29% instead of 27%.

Given our long-standing relationship with this client, and their on-going use of our licenses, we expect to continue to receive payments under this arrangement; however, the amount and timing are uncertain and will continue to be recorded on a cash basis, which may introduce some variability in our reported quarterly and annual annuity/maintenance revenue results.

Our annuity/maintenance license sales, representing our recurring revenue stream, have continued to experience consecutive quarterly increases over the past several fiscal years, with a double-digit growth experienced during each of the quarters in the current fiscal year as compared to the respective quarters of the previous fiscal year.

We can observe from the table below that the exchange rates between the US and Canadian dollars during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, had only a slight positive impact on our reported annuity/maintenance revenue.

Perpetual license sales decreased by 33% for the three months ended March 31, 2013, compared to the same period of the previous fiscal year, due to fewer perpetual sales being realized in the United States and Eastern Hemisphere markets in the current quarter.

Perpetual license sales for the year ended March 31, 2013, decreased by 34% compared to the previous fiscal year. In the first quarter of the previous fiscal year, we reported an amount associated with a multi-million dollar perpetual contract in the Eastern Hemisphere which contributed significantly to the revenue growth in the previous fiscal year.

Software licensing under perpetual sales is a significant part of CMG's business, but may fluctuate significantly between periods due to the uncertainty associated with the timing and the location where sales are generated. For this reason, even though we expect to achieve a certain level of aggregate perpetual sales on an annual basis, we expect to observe fluctuations in the quarterly perpetual revenue amounts throughout the fiscal year.

We can observe from the table below that the exchange rates between the US and Canadian dollars during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, had only a slight positive impact on our reported perpetual license revenue.

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

For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
US dollar annuity/maintenance license sales US$ 10,777 8,986 1,791 20 %
Weighted average conversion rate 1.006 0.994
Canadian dollar equivalent CDN$ 10,838 8,934 1,904 21 %
US dollar perpetual license sales US$ 1,475 3,281 (1,806 ) -55 %
Weighted average conversion rate 1.015 1.001
Canadian dollar equivalent CDN$ 1,497 3,285 (1,788 ) -54 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
US dollar annuity/maintenance license sales US$ 35,138 29,146 5,992 21 %
Weighted average conversion rate 1.003 0.993
Canadian dollar equivalent CDN$ 35,231 28,954 6,277 22 %
US dollar perpetual license sales US$ 5,634 12,425 (6,791 ) -55 %
Weighted average conversion rate 1.004 0.977
Canadian dollar equivalent CDN$ 5,657 12,142 (6,485 ) -53 %

REVENUE BY GEOGRAPHIC SEGMENT

For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Annuity/maintenance revenue
Canada 5,805 4,213 1,592 38 %
United States 2,799 2,337 462 20 %
South America 3,399 3,307 92 3 %
Eastern Hemisphere(1) 3,356 2,640 716 27 %
15,359 12,497 2,862 23 %
Perpetual revenue
Canada 803 204 599 294 %
United States 331 753 (422 ) -56 %
South America 232 177 55 31 %
Eastern Hemisphere 934 2,282 (1,348 ) -59 %
2,300 3,416 (1,116 ) -33 %
Total software license revenue
Canada 6,608 4,417 2,191 50 %
United States 3,130 3,090 40 1 %
South America 3,631 3,484 147 4 %
Eastern Hemisphere 4,290 4,922 (632 ) -13 %
17,659 15,913 1,746 11 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Annuity/maintenance revenue
Canada 21,708 15,946 5,762 36 %
United States 10,558 8,528 2,030 24 %
South America 10,169 8,536 1,633 19 %
Eastern Hemisphere(1) 12,120 9,848 2,272 23 %
54,555 42,858 11,697 27 %
Perpetual revenue
Canada 2,344 655 1,689 258 %
United States 993 1,746 (753 ) -43 %
South America 741 1,468 (727 ) -50 %
Eastern Hemisphere 4,328 8,855 (4,527 ) -51 %
8,406 12,724 (4,318 ) -34 %
Total software license revenue
Canada 24,052 16,601 7,451 45 %
United States 11,551 10,274 1,277 12 %
South America 10,910 10,004 906 9 %
Eastern Hemisphere 16,448 18,703 (2,255 ) -12 %
62,961 55,582 7,379 13 %
(1) Includes Europe, Africa, Asia and Australia.

On a geographic basis, total software license sales increased across all regions with the exception of the Eastern Hemisphere market which experienced overall decreases of 13% and 12% during the three months and year ended March 31, 2013, respectively, compared to the same periods of the previous fiscal year, due to lower perpetual sales. The most significant growth came from our annuity/maintenance license sales, with increases experienced across all regions for the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year.

The Canadian market (representing 38% of year-to-date total software revenue) experienced strong increases in annuity/maintenance license sales during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. These increases were supported by the sales to both new and existing clients. Perpetual sales also experienced increases during both the current quarter and year-to-date. The Canadian market continues to be the leader in generating total software license revenue and, particularly, in generating the recurring annuity/maintenance revenue as evidenced by the quarterly year-over-year increases of 17%, 32%, 37% and 37% recorded during Q4 2012, Q1 2013, Q2 2013, and Q3 2013, respectively. This growth trend has continued into the fourth quarter of the current fiscal year with the recorded increase of 38%.

The US market (representing 18% of year-to-date total software revenue) also grew annuity/maintenance license sales during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, driven by sales to new and existing clients. Fewer perpetual license sales were made during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. Similar to the Canadian market, we have continued to see successive increases in the annuity/maintenance license sales in the US as evidenced by the quarterly year-over-year increases of 26%, 20%, 24% and 32% recorded during Q4 2012, Q1 2013, Q2 2013, and Q3 2013, respectively. This growth trend has continued into the fourth quarter of the current fiscal year with the recorded increase of 20%.

South America (representing 17% of year-to-date total software revenue) experienced only a slight increase of 3% in annuity/maintenance revenue during the three months ended March 31, 2013, compared to the same period of the previous fiscal year, and a more significant increase of 19% during the year ended March 31, 2013, compared to the previous fiscal year. The revenue recognition in our South American region is affected by the revenue recorded on the long-term contract for which revenue is recognized on a cash basis (see the discussion about revenue earned in the current period that pertains to usage of products in prior quarters above the "Quarterly Software License Revenue" graph). Payments received from this particular client and recognized in the current quarter are similar to payments received and recognized in the fourth quarter of the previous fiscal year, not having a significant effect on the comparability of the quarterly revenue amounts. However, if we were to adjust annuity/maintenance revenue recorded for the years ended March 31, 2013 and 2012 for the described amounts, we would notice that the year-to-date revenue actually increased by 25% instead of 19%. The increase in annuity/maintenance revenue for the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, were mainly due to sales to both new and existing clients. The increase in annuity/maintenance license sales was offset by a decrease in perpetual license sales during the year ended March 31, 2013.

Eastern Hemisphere (representing 26% of the year-to-date total software revenue) grew annuity/maintenance license sales during both the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. Perpetual license sales decreased in both the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year. Year-to-date perpetual sales decreased as a result of the large perpetual sale made during the first quarter of the previous fiscal year which contributed significantly to revenue growth in the previous fiscal year.

Movements in perpetual sales across regions are indicative of the unpredictable nature of the timing and location of perpetual license sales. Overall, our recurring annuity/maintenance revenue base continues to be strong and growing across all regions. We will continue to focus our efforts on increasing our license sales to both existing and new clients and, supported by our product suite offering and our customer-oriented approach, we will endeavor to continue expanding our market share globally.

As footnoted in the Quarterly Performance table, in the normal course of business, CMG may complete the negotiation of certain annuity/maintenance contracts and/or fulfill revenue recognition requirements within a current quarter that includes usage of CMG's products in prior quarters. This situation particularly affects contracts negotiated with countries that face increased economic and political risks leading to revenue recognition criteria being satisfied only at the time of the receipt of cash. The dollar magnitude of such contracts may be significant to the quarterly comparatives of our annuity/maintenance revenue stream and, to provide a normalized comparison, we specifically identify the revenue component where revenue recognition is satisfied in the current period for products provided in previous quarters.

To view accompanying graph, visit the following link: http://media3.marketwire.com/docs/2013Q4chart.jpg

DEFERRED REVENUE

2013 2012 2011 $ change % change
($ thousands)
Deferred revenue at:
June 30 18,779 15,326 3,453 23 %
September 30 18,241 14,600 3,641 25 %
December 31 15,510 14,746 764 5 %
March 31 25,289 21,693 3,596 17 %

CMG's deferred revenue consists primarily of amounts for pre-sold licenses. Our annuity/maintenance revenue is deferred and recognized on a straight-line basis over the life of the related license period, which is generally one year or less. Amounts are deferred for licenses that have been provided and revenue recognition reflects the passage of time.

The increase in deferred revenue year-over-year as at June 30, September 30, December 31, and March 31 is reflective of the growth in annuity/maintenance license sales. The variation within the year is due to the timing of renewals of annuity and maintenance contracts that are skewed to the beginning of the calendar year which explains the increase in deferred revenue balance at fiscal year-end compared to the ending balances at June 30, September 30 and December 31. Our fourth quarter corresponds to 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.

Deferred revenue at March 31, 2013 increased by 17% compared to the prior fiscal year due to both renewal of the existing and signing of the new software licenses and maintenance contracts in the quarter. The increase in the current quarter did not match the growth in annuity/maintenance revenue due to the variation in renewal terms on two contracts and the non-renewal of two licensing agreements that amounted to approximately $700,000 of annual annuity/maintenance license revenue.

PROFESSIONAL SERVICES REVENUE

CMG recorded professional services revenue of $1.6 million for the three months ended March 31, 2013, representing an increase of $0.3 million compared to the same period of the previous fiscal year, due to an increase in project activities by our clients and the associated consulting activities in the current quarter. Professional services for the year ended March 31, 2013 amounted to $5.7 million compared to $5.5 million recorded in the previous fiscal year, representing a $0.2 million increase. The year-to-date revenue related to consulting activities actually increased by $0.5 million; however, this increase was offset by the inclusion of a $0.3 million grant in the professional services revenue in the first quarter of the previous fiscal year, which was received from the CMG Reservoir Simulation Foundation ("Foundation CMG") for the DRMS project. The grant was fulfilled during that same quarter; hence, no additional amounts related to the grant have been subsequently recorded as professional services.

Professional services revenue consists of specialized consulting, training, and contract research activities. CMG performs consulting and contract research activities on an ongoing basis, but such activities are not considered to be a core part of our business and are primarily undertaken to increase our knowledge base and hence expand the technological abilities of our simulators in a funded manner, combined with servicing our customers' needs. In addition, these activities are undertaken to market the capabilities of our suite of software products with the ultimate objective to increase software license sales. Our experience is that consulting activities are variable in nature as both the timing and dollar magnitude of work are dependent on activities and budgets within client companies.

Expenses
For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Sales, marketing and professional services 4,140 3,333 807 24 %
Research and development 3,456 2,994 462 15 %
General and administrative 1,806 1,695 111 7 %
Total operating expenses 9,402 8,022 1,380 17 %
Direct employee costs* 7,507 6,349 1,158 18 %
Other corporate costs 1,895 1,673 222 13 %
9,402 8,022 1,380 17 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Sales, marketing and professional services 15,473 13,036 2,437 19 %
Research and development 12,517 10,629 1,888 18 %
General and administrative 6,340 5,765 575 10 %
Total operating expenses 34,330 29,430 4,900 17 %
Direct employee costs* 27,309 23,376 3,933 17 %
Other corporate costs 7,021 6,054 967 16 %
34,330 29,430 4,900 17 %
* Includes salaries, bonuses, stock-based compensation, benefits, commissions, and professional development.

CMG's total operating expenses increased by 17% for both the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year, due to increases in both direct employee and other corporate costs.

DIRECT EMPLOYEE COSTS

As a technology company, CMG's largest area of expenditure is for its people. Approximately 80% of the total operating expenses in the year ended March 31, 2013 related to staff costs, compared to 79% recorded in the comparative period of last year. Staffing levels for the current fiscal year grew in comparison to the previous fiscal year to support our continued growth. At March 31, 2013, CMG's staff complement was 173 employees and consultants, up from 149 employees as at March 31, 2012. Direct employee costs increased during the three months and year ended March 31, 2013, compared to the same periods of the previous fiscal year due to staff additions, increased levels of compensation, commissions and related benefits.

OTHER CORPORATE COSTS

Other corporate costs increased by 13% for the three months ended March 31, 2013 compared to the same period of the previous fiscal year, mainly due to computer-related purchases and the increase in direct costs associated with professional services.

Other corporate costs increased by 16% for the year ended March 31, 2013, compared to the previous fiscal year, mainly due to inclusion of the costs associated with CMG's biennial technical symposium which took place during the first quarter of the current fiscal year. The remaining increase is attributable to the costs associated with the expansion of our office space, which are comprised of additional office rent, increased computing resources and increased depreciation associated with capital spending on the new space.

RESEARCH AND DEVELOPMENT

For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Research and development (gross) 3,906 3,444 462 13 %
SR&ED credits (450 ) (450 ) - 0 %
Research and development 3,456 2,994 462 15 %
Research and development as a % of total revenue 18 % 17 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Research and development (gross) 14,364 12,100 2,264 19 %
SR&ED credits (1,847 ) (1,471 ) (376 ) 26 %
Research and development 12,517 10,629 1,888 18 %
Research and development as a % of total revenue 18 % 17 %

CMG maintains its belief that its strategy of growing long-term value for shareholders can only be achieved through continued investment in research and development. CMG works closely with its customers to provide solutions to complex problems related to proven and new advanced recovery processes.

The above research and development includes CMG's share of joint research and development costs associated with the DRMS project of $0.9 million and $3.1 million for the three months and year ended March 31, 2013, respectively, (2012 - $0.7 million and $2.7 million). See discussion under "Commitments, Off Balance Sheet Items and Transactions with Related Parties."

The increases of 13% and 19% in our gross spending on research and development for the three months and year ended March 31, 2013, respectively, demonstrate our continued commitment to advancement of our technology which is the focal part of our business strategy.

Research and development costs, net of research and experimental development ("SR&ED") credits, increased by 15% during the three months ended March 31, 2013, compared to the same period of the previous fiscal year, due to increased employee compensation costs, and costs associated with computing resources.

Research and development costs, net of SR&ED credits, increased by 18% during the year ended March 31, 2013, compared to the same period of the previous fiscal year, due to increased employee compensation costs, investment in computing resources and facilities costs associated with the newly leased office space. We also had an increase in SR&ED credits for the year ended March 31, 2013, compared to the same period of the previous fiscal year, driven mainly by the increases in our direct employee costs as well as the increase in the eligibility of our expenses for SR&ED credits.

DEPRECIATION

For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Depreciation of property and equipment, allocated to:
Sales, marketing and professional services 126 105 21 20 %
Research and development 239 200 39 20 %
General and administrative 52 45 7 16 %
Total depreciation 417 350 67 19 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Depreciation of property and equipment, allocated to:
Sales, marketing and professional services 467 410 57 14 %
Research and development 880 583 297 51 %
General and administrative 192 234 (42 ) -18 %
Total depreciation 1,539 1,227 312 25 %

The quarterly and year-to-date increases in depreciation, compared to the same periods of the previous fiscal year, reflect the increase in our asset base, mainly as a result of increased spending on computing resources and expansion of the office space in the third quarter of the previous fiscal year, and additional office space added in the second quarter of the current fiscal year.

Finance Income and Costs
For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Interest income 139 131 8 6 %
Net foreign exchange gain 298 - 298 -
Total finance income 437 131 306 234 %
Total finance costs (represented by net foreign exchange loss) - (220 ) 220 -100 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Interest income 548 472 76 16 %
Net foreign exchange gain 311 548 (237 ) -43 %
Total finance income 859 1,020 (161 ) -16 %
Total finance costs (represented by net foreign exchange loss) - - - -

Interest income increased in the three months and year ended March 31, 2013, compared to the same periods of the prior fiscal year, mainly due to investing larger cash balances.

CMG is impacted by the movement of the US dollar against the Canadian dollar as approximately 67% (2012 - 73%) of CMG's revenue for the year ended March 31, 2013 is denominated in US dollars, whereas only approximately 23% (2012 - 24%) of CMG's total costs are denominated in US dollars.

CDN$ to US$ At March 31 Yearly average
2011 1.0290 0.9813
2012 1.0009 1.0106
2013 0.9846 0.9963

CMG recorded a net foreign exchange gain of $0.3 million for both the three months and year ended March 31, 2013, compared to a $0.2 million net foreign exchange loss and a $0.5 million net foreign exchange gain recorded in the three months and year ended March 31, 2012, respectively.

The weakening of the Canadian dollar during the fourth quarter of the current fiscal year, contributed positively to the valuation of our US-denominated working capital for the three months ended March 31, 2013 compared to the same period of the previous fiscal year. On the other hand, the fluctuation in the exchange rates between the Canadian and the US dollars during the current fiscal year, has contributed negatively to the valuation of our US-denominated working capital for the year ended March 31, 2013, compared to the same period of the previous fiscal year.

Income and Other Taxes

CMG's effective tax rate for the year ended March 31, 2013 is reflected as 29.38% (2012 - 28.30%), whereas the prevailing Canadian statutory tax rate is now 25.0%. This is primarily due to a combination of the non-tax deductibility of stock-based compensation expense and the benefit of foreign withholding taxes being realized only as a tax deduction as opposed to a tax credit.

The benefit recorded in CMG's books on the SR&ED investment tax credit program impacts deferred income taxes. The investment tax credit earned in the current fiscal year is utilized by CMG to reduce income taxes otherwise payable for the current fiscal year and the federal portion of this benefit bears an inherent tax liability as the amount of the credit is included in the subsequent year's taxable income for both federal and provincial purposes. The inherent tax liability on these investment tax credits is reflected in the year the credit is earned as a non-current deferred tax liability and then, in the following fiscal year, is transferred to income taxes payable.

Operating Profit and Net Income
For the three months ended March 31, 2013 2012 $ change % change
($ thousands, except per share amounts)
Total revenue 19,279 17,215 2,064 12 %
Operating expenses (9,402 ) (8,022 ) (1,380 ) 17 %
Operating profit 9,877 9,193 684 7 %
Operating profit as a % of total revenue 51 % 53 %
Net income for the period 7,253 6,620 633 10 %
Net income for the period as a % of total revenue 38 % 38 %
Earnings per share ($/share) 0.19 0.18 0.01 6 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands, except per share amounts)
Total revenue 68,620 61,034 7,586 12 %
Operating expenses (34,330 ) (29,430 ) (4,900 ) 17 %
Operating profit 34,290 31,604 2,686 8 %
Operating profit as a % of total revenue 50 % 52 %
Net income for the period 24,822 23,391 1,431 6 %
Net income for the period as a % of total revenue 36 % 38 %
Earnings per share ($/share) 0.66 0.63 0.03 5 %

Operating profit as a percentage of total revenue for the three months and year ended March 31, 2013 was at 51% and 50%, respectively, compared to 53% and 52% recorded in the same periods of the previous fiscal year. While our total revenue grew by 12%, our operating expenses grew by 17%, having a slight negative impact on our operating profit. Our high levels of operating profit as a percentage of revenue demonstrate our ability to continue to effectively manage our costs.

Net income for the period as a percentage of revenue remained consistent at 38% for the three months ended March 31, 2013, compared to the same period of the previous fiscal year.

Net income for the period as a percentage of revenue decreased to 36% for the year ended March 31, 2013, compared to 38% for the previous fiscal year, mainly as a result of recording a lower net foreign exchange gain and slightly higher tax expense in the current fiscal year.

We have continued to maintain our profitability by focusing our efforts on increasing license sales while, at the same time, effectively controlling our operating costs. Managing these variables will continue to be imperative to our future success.

EBITDA
For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Net income for the period 7,253 6,620 633 10 %
Add (deduct):
Depreciation 417 350 67 19 %
Finance income (437 ) (131 ) (306 ) 234 %
Finance costs - 220 (220 ) -100 %
Income and other taxes 3,061 2,484 577 23 %
EBITDA 10,294 9,543 751 8 %
EBITDA as a % of total revenue 53 % 55 %
For the year ended March 31, 2013 2012 $ change % change
($ thousands)
Net income for the period 24,822 23,391 1,431 6 %
Add (deduct):
Depreciation 1,539 1,227 312 25 %
Finance income (859 ) (1,020 ) 161 -16 %
Finance costs - - - -
Income and other taxes 10,327 9,233 1,094 12 %
EBITDA 35,829 32,831 2,998 9 %
EBITDA as a % of total revenue 52 % 54 %

EBITDA increased by 8% and 9% for the three months and year ended March 31, 2013, respectively, compared to the same periods of the previous fiscal year. These increases provide further indication of our ability to keep growing our recurring annuity/maintenance license sales while effectively managing costs in relation to this base.

EBITDA as a percent of total revenue for the three months and year ended March 31, 2013 was at 53% and 52%, respectively, compared to 55% and 54% recorded in the same periods of the previous fiscal year, respectively.

Liquidity and Capital Resources
For the three months ended March 31, 2013 2012 $ change % change
($ thousands)
Cash, beginning of period 52,236 47,615 4,621 10 %
Cash flow from (used in):
Operating activities 11,155 11,512 (357 ) -3 %
Financing activities (3,718 ) (3...