Umesh
RT @guicastellanos1: @umesh_ai Amazing sref! here an aztec temple! https://t.co/BpwJ1vJqg4
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Investing visuals
$ASML Q3 earnings 🚨

• Net bookings: €5.4B vs Est. €5.2B
• Rev: €7.5B vs Est. €7.65B
• Gross Margin: 51.6% vs Est. 51.3%

Q4 outlook
• Rev: €9.2-9.8B vs Est. €9.3B
• Gross Margin: 51-53% vs Est. 51% https://t.co/Mpu2Buck1k
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Dimitry Nakhla | Babylon Capital®
ASML Holding $ASML Q3 2025 earnings 🗓️

🆗 REV: €7.52 vs €7.74B est
✅ EPS: €5.49 vs €5.36 est

Quarterly net bookings Q3 of €5.4B (€3.6B EUV)

Outlook Q4 2025
Revenue €9.2B - €9.8B vs €9.3B est https://t.co/y5miPvMZbJ
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ToffCap
$ASML ✅ https://t.co/75pN5Mv3rp
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Hidden Value Gems
Looks like Vltava fund and Vulcan purchased $FI in Q3. Here are their rationales... https://t.co/hIaWBRXaMI

Anyone saw a good summary on Fiserv after the recent drop? I know more names will be on sale shortly, but thinking longer term - could be an interesting opportunity. Curious why the share price dropped so much recently, is it worth looking at them now? 🤔

$FI - Hidden Value Gems
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Capital Employed
RT @capitalemployed: 43 Excellent stock pitches to get stuck into, from both fund managers and some very smart private investors --->

https://t.co/GWDhHEhLim https://t.co/fw4YBkbJQr
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Yellowbrick Investing
$CMG.TO

2/ 🚨Behind The Buy 🚨

Here's why I’m buying Computer Modelling Group: $CMG.TO $CMG

Computer Modelling Group (CMG) is a mission-critical, sticky software provider serving the upstream oil and gas industry. Historically, it generated 40%+ profit margins and paid out nearly all of it in the form of dividends. With little attention paid to reinvesting its cash at attractive rates of return, the stock has languished over the past decade. Since 2022, however, CMG has undergone a dramatic change: new management, a board infused with Constellation Software (CSI) DNA, and a more disciplined approach to capital allocation. Despite short-term setbacks in organic growth, I believe the company is significantly undervalued and poised for meaningful share price appreciation over the next decade.

What does Computer Modelling Group do?

In its simplest form, CMG provides software that enables upstream oil and gas companies to simulate and predict how their reservoirs will behave over time. This is a critical task for operators, as reservoirs are expensive, unique, and poorly understood physical systems. CMG is globally diversified and employs ~300 people.

Introduction

CMG is a turnaround play, and my objective with this post is to share with you why I believe management can turn the ship around. Before getting into the challenges they are facing, I will talk about the pros and why I believe this is a high-quality company worth owning.

Strong Market Presence

CMG commands roughly 35% market share in the reservoir simulation software space, second only to Schlumberger at 55%. Nearly all major operators use more than one simulator: Schlumberger’s Eclipse/INTERSECT leads for more conventional scenarios, and CMG stars in advanced, unconventional processes.

The depth of CMG’s customer base is striking. Every one of the world’s super-majors is a client. Ninety percent of the top-10 national oil companies and 75% of the top-25 largest oil companies use CMG. These are not fleeting relationships — ONGC in India, for example, has used CMG’s software since 1992. Even firms with proprietary in-house simulators (Shell, Exxon, ConocoPhillips) still license CMG products, because CMG’s expertise in niche areas is unmatched.

One of its crown jewels is STARS, the industry benchmark for modeling steam injection, in-situ combustion, and other complex techniques (important for heavy oil simulation). In the Canadian heavy oil market, CMG has what amounts to a monopoly: all 20 of Canada’s largest heavy oil operators use STARS. Customers love the product — evidenced by its industry-leading Net Promoter Score of 68 — and tend to stick with it.

Switching Costs

The barriers to switching away from CMG are high. Reservoirs don’t change whesingle-seatn software does, which means a customer would need to painstakingly replicate years of calibration in a new system — a risky and expensive proposition. CMG’s products embody more than four decades of R&D, and the industry prefers proven tools because reservoir simulation is enormously complex. Drilling a single well can cost $2–20 million, whereas a single seat reservoir simulation license might cost on the order of $40–100k per year.

Even if a competitor offers a superior price, customers incur months of parallel operation, staff retraining, and lost productivity during transition. CMG has also followed the Adobe and Autodesk playbook, partnering with more than 200 universities to embed its tools into training programs. This ensures that young professionals arrive at their jobs already familiar with CMG’s software.

CMG’s CEO noted that when competitors have tried to dislodge CMG in markets where it’s dominant, they resorted to discounting their product by “as much as 90%” — yet still struggled to get customers to switch. CMG historically has achieved renewal rates well above 95% for its software licenses, though that number is not immune to the cyclicality of the industry (more on this lat[...]

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, the company began to change. Recognizing that they owned a mission-critical, high-margin business with significant potential, CMG’s largest shareholder, EdgePoint Capital — run by Andrew Pastor — began to reshape the team.

Enter Constellation Software Exposure

Andrew Pastor is one of Constellation Software’s board members and has been a partner at EdgePoint since 2013. EdgePoint first invested in CMG in 2017 and has since increased its position nearly tenfold, becoming the company’s largest shareholder with a 28% stake. Given his board seat at Constellation Software (as of 9/4/2025, he has become the chair), he understood a simple formula: profitable mission-critical software + high ROIC + high reinvestment rate = outsized returns. His goal was to deploy this formula at CMG.

In 2019, Mark Miller joined the board and in 2024, moved into a Chairman role. Mark Miller was instrumental in building Volaris Group into the VMS behemoth it is today (Mark Miller recently left his role on the board in September 2025, but was key in shaping the culture and decision-making within the current leadership team). In 2024, Birgit Troy also joined the board; she was the CFO at Lumine Group (another one of Constellation Software’s seven operating groups) from 2016–2021. John Billowits, ex-VELA Group CEO, also served on the CMG board from 2021–2024. Additionally, their current head of corporate development, Mohammad Khalaf, worked as a VP of M&A for Harris Computer Group for about seven years. In July 2025, the CFO of CSI's Perseus operating group, Vipin Khullar, departed from his role and joined CMG as their new CFO.

In 2022, the CMG board announced a new CEO — enter Pramod Jain.

Pramod Jain came in as CEO in May 2022 with little experience in oil and gas but a strong background in engineering and previous leadership roles in software companies. Since joining, the stock is up ~45%, revenues are up ~95%, and EBIT is up 42%. One of his first priorities was to halt executive RSU grants and implement an after-tax bonus share purchase program (similar to CSI) to reduce dilution and make the business more shareholder-friendly.

Pramod also restructured leadership bonuses to include ROIC as a KPI, and wrote clear, candid shareholder letters reminiscent of Buffett and Mark Leonard. Two qualities stand out in his communication: accountability and a growing appreciation for compounding — no doubt influenced by his interactions with his CSI mentors.

Acquisition History

CMG has made it clear that redeploying excess free cash flow into acquisitions at attractive rates of return is one of its core pillars for growth.

CMG made its first material acquisition in Q3 2023 of a business called Bluware for $22M upfront plus $8M earnout (earnout paid 18 months after closing). At the time, Bluware had total revenues of $23.5M (US$17.7M from services and US$5.8M from software) with an adjusted EBITDA margin of 5%. Since then, CMG claims that financials are on target, with annualized software revenue up 50% from pre-acquisition levels (~$9M in ARR) and adjusted EBITDA margin expanding from roughly 5% to 15%. We should learn whether their earn-out is paid in full next quarter, which will help assess if it’s meeting expectations.

In November 2024, they made their second material acquisition of Sharp Reflections for ~€25M. Sharp had revenues of €10M, with 70% recurring software revenue and 30% services revenue, and low double-digit EBITDA margins.

In Bluware’s case, they paid ~5× ARR (inclusive of earn-out), and in Sharp’s case, ~3.5× ARR. While these seem expensive on the surface, both businesses are growing much faster than CMG’s core business (Bluware ARR grew 50% over 18 months). Their returns hinge on sustaining revenue growt[...]

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[...]

nd improve profitability in its acquired businesses. The most important metrics I’ll watch going forward are organic revenue growth, cash flow margins, and capital deployed. - Behind the Buy tweet

Umesh
The mysterious image editing nodel Riverflow is available on Runware!

It has scored better than nano banana on Artificial Analysis Arena

Riverflow 1 now live, ONLY on @RunwareAI!

Everyone has been wondering about this mysterious new model that thinks like an LLM, gives perfect one-shot results, and is now topping the leaderboards.

Here are the details. 🧵 - Runware
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