Offshore

er). In 2022, everything changed... Between 2013 and 2022, CMG was stagnant. Annual revenues oscillated between $66M and $85M for a decade. Margins were high, customers were loyal, but management simply distributed cash through dividends. In 2022, however…

h and further enhancing the profitability of the acquired businesses.

Both acquisitions expanded CMG’s seismic data capabilities, and CMG has indicated they are also looking to deploy capital outside of the upstream oil market into adjacent verticals (e.g., mining). M&A has been a large part of their revenue growth since Pramod joined, and the success of these acquisitions — and their ability to execute future ones — is crucial to long-term returns. In CMG's recent shareholder letter, Pramod indicated that both acquisitions are tracking towards their IRR goals.

Additionally, the recent dividend cut highlights management's ambitions to continue deploying capital at high IRRs.

Insider Buying

Over the last several month, several executives — including CEO Pramod — have made open-market share purchases in CMG. Take this with a grain of salt, but it is encouraging to see insiders voluntarily increasing their skin in the game.

The Cons

So far, I’ve largely discussed the pros, so it might surprise you to know the stock is down 44% over the past year.

Last Quarter...

CMG finished FY 2025 (year ending March 31, 2025) with total revenue of $130M, growing 20% YoY. Two-thirds of total revenue was recurring ($86M), which grew 13% YoY. Organic revenue growth was flat — 12% of ARR growth came from acquisition and 1% from FX.
The real problem surfaced in the Q4 FY 2025 quarterly numbers, where organic recurring revenue fell 11%. While headline recurring revenue grew 16%, 27% of that was driven by the Sharp acquisition and favorable FX — masking the underlying weakness in the core business. Pramod attributed this drop to lower oil prices, which led to higher customer attrition. Management noted this kind of decline also occurred during COVID, but the recent oil price drop is nowhere near as severe as 2020.

Additionally, management guided to flat revenue growth for FY 2026 due to a significant reduction in PS revenue from winding down CoFlow development and a reduction in services revenue at Bluware. While Pramod claims this reflects a strategic push towards making ARR 80% of revenue, the logic is unconvincing: they deliberately acquired Bluware, predominantly a services business. Compounding this, they’ve moved to a single reporting segment — collapsing Bluware and Sharp into the whole — which will obscure the underlying performance of these acquisitions.

Customer Concentration

In FY 2025, Shell contributed 22% of total revenue. The long-standing Shell–CMG partnership included a multi-year effort to develop “CoFlow,” an integrated production system modeling software customized for Shell. CMG has since announced it will cease further development of CoFlow, citing limited commercial adoption beyond Shell despite significant R&D investment — a consequence of how highly tailored the product was. Nevertheless, Shell remains a customer, but it is worth keeping a close eye on their relationship.

Valuation Framework

One of the central questions with any turnaround stock is whether the decline in share price already reflects the underlying issues — or if there’s further downside ahead. In FY 2024, CMG generated $35.2M in free cash flow (FCF), which fell to $27.6M in FY 2025, though roughly half of that decline was due to a one-time tax benefit recognized in FY 2024.

At a current market cap of ~$530M, CMG trades at a ~5% FCF yield, for a company that has grown its EBIT at a CAGR of 12.4% since Pramod joined in 2022. The setup looks compelling here, even if you price in mid-single-digit FCF growth per year going forward.

In Summary

CMG is a cash cow, figuring out how to redeploy its free cash flow at high rates of return. With the management changes of 2022, and a board and M&A team steeped in Constellation Software discipline, I believe the company will overcome its short-term hiccups and deliver strong share price gains as the market catches on.

I’ve initiated a small position in CMG, as I wait for confirmation that the company can manage attrition a[...]

1 view10:20