Existing customers are purchasing additional licenses, too. Demand is vibrant in all geographic markets. Volume is responding to the combination of steady selling prices for oil and declining production costs. Enhanced recovery techniques traditionally were expensive and unreliable. Computer Modelling's software has played a role in driving costs down, and production up. Companies that deliver those enhanced recovery and fracking methods have boosted price performance dramatically, moreover. Difficult to recover reserves like tar sands, shale, and heavy oil are becoming increasingly economical to produce.
The renewal rate remains in the 95%-98% range. Occasionally a license is not renewed after a project ends. But most customers retain the technology and just move the expertise to a new target. Computer Modelling has been transitioning its customer base from perpetual to annual licenses for several years. Some still prefer the perpetual format, though. Those deals cause quarterly results to fluctuate, due to the higher dollar amounts involved. The underlying trend in annuity revenue continues to advance at a 15%-25% rate. Profitability exceeds 50% pretax. A large portion of income is paid out as cash dividends. Our estimates are unchanged.
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