Well, good evening, everyone. And well, good afternoon, good evening. I guess I'm the last meeting or presentation before the drink starts. Great to be here. First time at EDM Conference, so privileged to be here and telling the CMG story. So CMG Computer Modelling Group is listed on TSX as CMG, and we've been publicly listed over the last 20 years or so. And I'll give some context about what the business is and what are we trying to achieve, and leave some time at the end for Q&A. So my name is Pramod Jain. I'm the CEO of Computer Modelling Group, joined roughly two or two and a half, three years ago. And it's quite new in terms of my tenure here at CMG and the CMG 4.0 story that we are banking on.
The way I describe CMG, and the area that we play in is through this slide because not many times you will find a scenario where the engineers have to go and do their job with the blindfold on. This happens a lot in the sector that we play in, so within that energy sector, we are specifically in that upstream business, which is exploration and production, and we're talking about subsurface where you're trying to recover oil and gas, where things you just can't see, and these reservoir engineers have to make decisions on a day-to-day basis to figure out the best possible asset in terms of production of oil and gas, and they have to do that by making sure that the risks are minimized as well because one bad decision can lead to millions of dollars that can get wasted.
So this job that the engineers have to do with the blindfold on can be done if you have simulation. So simulation is the eyes for reservoir engineers. And why do you simulate? You simulate because you want to have as many permutation and combination done before you start doing the first drilling. You see simulation happening in manufacturing industries. You see simulation that happens in semiconductors. You see simulation happening in car companies where a lot of trials and runs and permutation combinations are run. Specifically to oil and gas, what you see over here is the image of a reservoir where you start to see where the oil and gas is. And then how do I make sure that you have the best possible recovery that can happen?
To give you guys an idea, a typical well or an asset, the recovery factor of that would be between 10%. Sometimes it can be 20%. So even though you will have a huge capacity of reservoir, but the recovery factor is so low. And that happens when the well started to decline. The longer the well is operational, you see a decline that happens throughout it. So you want to make sure that as you simulate a new discovery or you discover or you start to do drilling on an existing asset, you are doing simulation not just on a one-time basis, but you, you're doing simulation on all the time. Like you're also doing brownfield optimization. So simulation really, it makes the job of petroleum engineers possible. That's the eyes of the engineers.
I'll speak about CMG core business first because that's how we started. As I mentioned, CMG listed on TSX since 1997. The origination of the company starts back to 1978. In 1978, University of Calgary got a grant from Albertan government, government of Alberta. At the time, oil and gas was starting to boom quite a bit. In Canada, especially in Alberta, there's Canadian oil sands. Extracting oil and gas from those Canadian oil sands is very difficult, very complex. There was a famous technique that was established at the time called SAGD, which is using steam and thermal aspect of using that to recover oil and gas. As you can imagine, the complexity, the higher the complexity you need to simulate before you start to make those big operations.
University of Calgary and then Alberta government money was used to build the first, arguably the commercial simulator in the world called STARS. That's how CMG started. Fast forward now 47 years, 100% of super majors use CMG software around the world. There's not an oil and gas company that you will find where CMG software is not installed or not being used. Recurring revenue, 78%. 80% of recurring revenue, which speaks a lot about how mission-critical the business is, how sticky the business is, how the barriers of entry is hard because we still talk about two or three large competitors in this space doing reservoir simulation. Globally diversified clients. And I'll talk about how the revenue streams are. But in general, even though we started from Canada, now we have operations in US, in Latin America, Southeast Asia, and so on.
Very globally diversified business. Strong free cash flow. So not only business is on a growth path, but also generates a lot of cash flows for the business, which can then deploy in our acquisition strategy. 47 years of category leadership. First commercial simulator in the world. And since then now, we have three simulators that do a variety of different asset mix. And I'm gonna speak a lot about that. I'll also say that in terms of number of customers, we have close to 650 customers, 450 oil and gas companies, and then 200 of them are universities. Why universities? That's our seeding strategy. So think of you finance professionals as when you use Bloomberg in your university days. Same, same concept applies for CMG where CMG software is donated to universities. The users have a lot of buying power, so they get used to CMG software.
So when they graduate, they come out and do their job, they have propensity to buy CMG software. And that's how we've been doing it for the last 40-plus years. So numbers from a total revenue perspective, CAD 87.9 million, 45% of adjusted EBITDA. There's a pretty healthy cash flow conversion from EBITDA. 80% of that is free cash flow. 23% of that from that 87.9 is on revenue from energy transition. And I'm gonna speak about that. I know some of you are here new to the energy industry. I want to take a couple of minutes to talk a little bit about the type of assets or the recovery type that's used for a variety of different aspects of it where simulation or CMG software gets used. Conventional.
So if you think about conventional, it's like I tend to explain that by saying easy oil or black oil. So the old days of drilling, vertically, you drill a well and then the oil comes out. Or jokingly, when you say in the Middle East, when the oil is available, you put a straw and the oil is out. So there is, there's a lot of that terms that gets used interchangeably. So black oil, conventional way of drilling, that's how oil and gas industry kind of started. So that's conventional. What's more important in the conventional space is speed. So you want to simulate, but since the complexity is less compared to the complex assets, you wanna ensure that you get quick answers so you can apply for a permit, and then you are on your way to do drilling or optimization.
The second is heavy oil. Now, this is where Canadian oil sands concept comes in. Heavy oil means higher in viscosity, so you have less recovery from that asset. And the asset type will depend a lot on the geography type. In Canada oil sands or Venezuela, it's very much about heavy oil assets. So that's where simulation becomes very critical. So when I mention about steam in Canada, steam was a way to ensure that you have more oil coming out of it. But when you introduce steam into the reservoir, you also increase the complexity around it, and that makes things challenging. And simulation is the key. Unconventional. So anything which is not vertical, so you're doing horizontal wells, you're able to reach different aspects of a reservoir. That's unconventional. A good example of that is U.S. shale market.
U.S. shale market boomed quite a bit in 2000s, 2010, and got the independence for oil and gas within the United States because shale boom happened. Now, shale is a type of a rock, and you're extracting oil and gas from a rock in a very unconventional way. The technique used there, you'll quite hear about it, is hydraulic fracturing. So how do you frac and how do you make sure that you use water and quick pressure on that to extract oil and gas from those shale rocks? That's one of the examples of unconventional drilling. Enhanced oil recovery. As I mentioned that you drill a well, the recovery is around 10%, 15% depending on the type of geology or the well type it is. But as the recovery is declining over the period of time, you have two choices.
You can abandon the well, you can start to explore a new one, but that's very expensive, or you want to capitalize on recovering more and more as possible, so enhanced oil recovery, as the name says, it's really about looking at different techniques to get more from the oil. You increase the lifespan of a well. And some of the techniques could be is that you're adding solvents, and that's helping getting the recovery. You're adding more chemicals, or you're adding water, steam, different types of flooding. That becomes enhanced oil recovery. The right-hand side that you see over here, CCS, geothermal, hydrogen, they are examples of energy transition. We all know that net zero is something that we all are working towards. We need energy from all sources, so we need energy from renewable sources, non-renewable resources, fossil fuels, etc.
But when it comes down to net zero and energy transition, the three that I'm speaking about where CMG has a direct applicability are carbon capture and storage, CCS, hydrogen, and geothermal. Now, CCS is where right now there is a immediate plug-and-play applicability of, of CMG software. Why? Because if I look at enhanced oil recovery that is used to get more oil and gas from the ground, carbon dioxide is actually used to do that. Because carbon dioxide increased to help the heat up the reservoir, and you get more oil out. Now it's an inverse of that. Carbon capture really is to make sure that when you capture the carbon from the atmosphere, you take that and then you find a place where you can store the carbon dioxide forever, 50 years, 100 years, 150 years.
The idea really is that it never leaks or it doesn't contaminate the groundwater because that could be an issue as well. Ideal state for CCS could be that the carbon dioxide starts to become rocks over the period of time, but that takes a long time. So CCS, why it has picked up quite a bit over the last few years, I would say a lot of government help. So there is, of course, a macro environment into it. I'm sure you heard about the Inflation Reduction Act that was issued in the U.S. a couple of years ago, and the idea is to incentivize oil and gas companies to then get tax subsidies if they're really working towards direct capturing carbon dioxide, storing carbon dioxide, and they get the tax subsidies. CMG was the first one in this space.
We've been doing it for the last 20 years. We did that when this concept was not popular. It was done by a Japanese customer that we built together in 1994, and we built our simulator, GEM, around it. So CCS has become a key growth area for us as there's an investment going into it from the governments. The second one is geothermal. Now, geothermal is very similar to the steam concept that I talked about in the Canadian market where you're using steam to extract oil and gas. In this case, how are you warming up the reservoir even in the assets which does not have the hot, hot beds around it? So how do you use different techniques to create more energy from that? So we have a solution towards it. Geothermal still, I would say, is in an infancy stage, because it's expensive.
There are ways and different research going on in the U.S. and Canada to figure out a way to make it much more efficient and much more scalable. The CMG simulation solution goes right towards that here. The last part is hydrogen. Now, hydrogen, whether that's a green hydrogen or a blue hydrogen, is deemed as a great resource in terms of combating net zero. The challenge with hydrogen is that it is very volatile, more volatile than carbon dioxide. How do you transport hydrogen? For carbon dioxide, you can cool it, and that becomes a liquefied gas that you can transport. Hydrogen is gonna require a very different temperature in terms of transporting it. A lot of transportation capabilities required. How do you store it under the ground? How does it react with the microbes inside the ground?
So there's a lot more complexity around it. And then you have to find different types of consumers for hydrogen as well. Needless to say, there's a lot of hope and optimism by researchers on hydrogen. Again, the good news for CMG is that it's gonna be similar simulator that we are using for carbon capture storage that we can start to expand towards the hydrogen side. So the key aspect I want to make over here is that whether that's traditional oil and gas, fossil fuels, whether we are drilling more oil, more wells, more exploration, more production, or we are pivoting towards energy transition, or you're doing both, CMG remains well diversified in terms of going one way or the other or both. Speaking about diversity, it's also important to highlight the regional diversity that we have got in the business.
As I mentioned, we started from Canada. From Canada, we expanded that to Venezuela where heavy oil was there, from there to US, then Europe, and then Middle East and Africa, and then Asia-Pacific. As you can see from the numbers over here, it's very well diversified. In fact, only 18% of our revenue right now is in Canada, and then there's a big element of that 44% coming from Eastern Hemisphere, which is Europe, Middle East, Africa, and APAC. Now, I do want to take a moment to talk about key market trends per region because even if you think about energy industry as a whole, there are nuances to each of the market, and that impacts the growth profile of CMG. So I'll start from Canada. Now, Canada is a home base for CMG, and that's how we started.
But in Canada, we already have 80% of our market share. So we are kind of on the defense in this side because when you are number one in that space because of heavy oil, you want to ensure that you regain the ground, you hold down the fort because the competitors want to take away your market share. So there is definitely more of a plateau in terms of the growth opportunity. But we do see that there are other products that CMG is starting to roll out, which will help in terms of that upsell opportunity within Canada. Second is US. Now, U.S. is a very competitive market. In US, what has happened over the last, I would say, a few years, because of all the shale boom that happened, shale is a very interesting asset because it's short-term.
You drill a well, and you exploit that for four or five years. What that does is you have a lot of data that's available. Simulation is very important when you don't have data or you are really trying to make some big decisions for a very long time. I mentioned CCS as an example. It's a 100-year study. In shale market and in US, because of that short-term nature of the business and the fact there's a lot of hype around data and analytics, U.S. remains a competitive position, and it's really about, can I get a quick answer? So we have done an acquisition, a tech tuck-in, that we did to counter that market trend that we are seeing in this particular space. The focus remained on hydraulic fracturing. The focus remains on well completion and well interference.
So that is the dynamic on the U.S. market, and it's a competitive market, but a growing market, lots of companies in the U.S. that are operating, especially with the oil prices that are there today. South America. South America is poised to grow even further. We have one of the largest customers in South America, especially in Brazil, that are using CMG software. And compared to Europe or even in the US, South America is very big on exploration and production. So they are constantly looking at new opportunities, new discoveries. So in Brazil, for example, there's a lot of pre-salt work. There's a lot of ultra-deepwater investment going on because you're talking about these big FPSOs, those floating platforms that you see far off at sea. That's what they cost $1 billion or more.
And the idea really is that if you're drilling in that deep ultra-water, it takes a lot of time, lots of effort, lots of complexity, but the returns are very, very high. So we believe that South America, whether that's new discoveries in Guyana, in other places, Colombia, Argentina, going into unconventionals, a lot of opportunity in this particular space from a growth perspective given the nature of the macro and what they are trying to do over here. Now, we haven't broken down Eastern Hemisphere, in these numbers, but let me take a moment to just start to look at APAC, Asia, and Middle East. So Europe is our competitor home ground. So, of course, we are on that trend of saying that how can we start to displace some of the market share in this regard. But Europe right now is less oil and gas.
It's really about energy transition. So there's a lot of work, a lot of activity happening in CCS space, especially in North Sea. So Europe is the pioneer of the fact that they get a lot of stick from the government if you explore or you do oil and gas activity compared to U.S., which is really more carrot than a stick. So different geology and different geography have a different type of a trend, that's going in. So Europe for us is going to be more about how do we get more market share and displacing the competitor and hard and banking on the CCS trend, which is important because CMG is the market leader in the CCS space because of our 20 years plus of experience. Middle East is interesting because they're large national oil companies.
And you're talking about ADNOC, which is the largest provider in Abu Dhabi. You're talking about KOC. They are the largest in Kuwait. But these are large, oil and gas companies who are state-owned. They are NOCs, national oil companies. And CMG is there in most of it except the big one, which is Saudi Aramco. Saudi Aramco is the largest producer of oil and gas in the world. And the opportunity there is for us to get inside and start doing business, whether that's on the CCS side or the unconventional side. So definitely Middle East continues to remain as a growth opportunity for us. Africa, we're not actually present in Africa in a lot of places. Angola, Nigeria, these are the greenfield places for us to now tap into.
Keep in mind the CMG sales team is quite lean compared to the giants that we compete with. So there's an opportunity for here, for us to go inside these new geographies and get the market share because we have a product that can scale towards that. We need to have the right partners and the right agents which can get us towards the new geographies. Then I'll speak about APAC. Now, APAC, within APAC, Australia is a complete new opportunity for us. That's an area that we haven't really made inroads into. So definitely an effort there to get inside Australia. Again, our product fits very well. We just need to make sure that we have the right partners to get us there. But apart from Australia, you talk about India, you talk about Indonesia, Japan, Southeast Asia, like China, Korea. CMG has a lot of presence.
And what's happening in this region is that you see a lot of that wells declining, and they're looking for enhanced oil recovery. They're looking for best practices from the U.S. to say, how did they, U.S. and Canada, how were they able to get more oil out? So now they're looking at opportunities and contacting them. And the good news for us is CMG is present in Southeast Asia, and it plays to the sweet spot of where CMG is strong at. The overall TAM for the business really is close to $800 million. And out of that $800 million TAM, you would think $300 million plays to the sweet spot of CMG, which is focusing on unconventional, focusing on enhanced oil recovery.
If the easy oil is gone, if you believe easy oil is gone, enhanced oil recovery and unconventional is gonna grow at 4% or 5% CAGR, then CMG is well placed in terms of making sure that the TAM, the pie keeps on growing in that market set. So CMG 4.0 strategy. I came in roughly May 20, 2022. So it's been two and a half years. As me being the fourth CEO of the business, so hence the name CMG 4.0 strategy. It's really a transformation and turnaround story. My background is that I'm not an oil and gas guy. I've always been in technology. I've been in travel tech and hospitality tech for my majority of my career.
But what I've done over the period of time is I've acquired businesses mostly in Europe, and I've ran them and turned them around, whether that's for the growth or for the profitability. So when this opportunity came to me, I took my, my time. CMG being a public company, a lot of data being available, took me a good three, four months to build my own thesis and start to look at that very strong fundamentals. You're seeing the strong customer base, a brand, a product that is out there for 40 plus years, small competitors, and the competitors who have not been able to enter inside. So a lot of strong fundamentals in play. But it's still a transformation story. And the reason I say that it's a transformation story is because we wanted to kickstart the organic growth because we play in a niche market.
And you have to believe that if you don't keep innovating, no matter how strong the niche is, the moat gets smaller. And competition, if they really put resources and horsepower into it, they can shrink that moat as well. So the idea really is that how do you preserve the long-term per-share profitability? That is the goal for the business, which is driving a tremendous amount of cash flow. But how do you deploy that capital? How do you still focus on the organic growth of the businesses? So that is the key element of the CMG 4.0 strategy. And among this transformation, a couple of things that are important to call out. Number one is CMG history is coming from university. It is a research mindset, which is very important because it got us here.
But in that mindset, oftentimes what happens is that you also miss out on the commercial opportunities, right? Do I really have to build a product? I'm an engineer, and we engineers have a tendency to solve all the problems given to us. But when you take a transition from an engineer to a business, you tend to look at to say, is that problem going to make me money? And that mindset, that culture shift is important to do. And that was the first step towards making that CMG 4.0 transition from a cultural standpoint where we have brilliant PhDs and brilliant physicists and petroleum engineers. But then how do you start to build roadmaps, which is client-facing, and you're building stuff because someone has asked you to build, and they're gonna pay for it? So that's number one.
Number two, using the best-in-class software practices to say, how do you create the right compensation structure? And that has to be a performance-based culture. So you are putting up goals which are tied back to the company's short-term performance and long-term performance. And then you are tied back to company performance, your team performance, and your individual performance, A times B times C. That wasn't the case before. So that was another aspect that we added into it. And number three is sales and market and go-to-market, right? So sales team, if you incentivize them differently, they will give you different results. So if you're going after the growth, you want to make sure that you're not just rewarding them for renewals. You have a good combination of renewals, which are very important because it's a share of wallet game, but it's also important to get new logos, right?
So how do you incentivize both the farmer mindset, the hunter role, and then you bring them all together in this regard? Marketing is not just showing up at the booth and demonstrating your products. For us, marketing was also being a category creator. So I talked about energy transition and how CCS is a very important growth level for us. We did that on purpose to make sure that we double down on our strengths and we create thought leadership around CCS. Why is CCS important? Why do you don't want to take chances on subpar technology? You want to go with the tried and the tested one and make sure our customers are standing on the stage and talking about it. The other example is IPSM, which is CoFlow. CoFlow is our product line, which has been in works for a while now.
The reason why it's so hard to get the product inside these oil and gas companies is because it's, again, a category creation. CoFlow, again, to give you guys a very high-level idea, is really connecting the two silos. You're talking about subsurface engineers who are working reservoir. Then you're talking production engineers who are working their facilities and compressors and whatnot. Ultimately, you have to connect them together. When I talk about increase and recovery, it's not gonna happen by looking at one. You have to connect the entire network because the plans that you're gonna put together under the ground have to be fulfilled by things which are happening over the ground, and the engineers have to look at it, but reservoir engineers don't care about what's happening on the production side, and production engineers don't care about what's happening on the reservoir side.
So there is silo. The people who really care are asset managers or C levels or V levels. But again, it's a mindset change, and that's very critical in this regard. So how do you show up from a marketing standpoint and position your product, and you are considered as a thought leader in that particular space? The last piece I will highlight is M&A. So the company had never done M&A until my arrival, and it was important for us to look at M&A as a key growth vehicle. Yeah, you can focus on the organic growth. You can start to double down on key initiatives, maybe start to take on some big CapEx projects, which I'm not a fan of, but there's always limited success that can happen.
So you wanna look at if you have cash sitting on your balance sheet and if it's sitting on your bank generating 3-4% return, what are you doing with it, right? Do you have either you're giving back to shareholders in the form of dividends or you're starting to do something with it? And the strategy that we have taken on is first, let's build the M&A team out and build that M&A muscle, and then go from there in terms of those strategic acquisitions that I'm gonna speak about that are gonna drive the organic growth for the businesses as well. So these are some of the key, value drivers that became part of CMG 4.0 strategy. Again, the goal is really to increase the free cash flow per share. So you look at, the revenue, right?
So this is growth happening that's not only organic just by CMG. So in 2022, at my arrival point to 2023, that was just CMG itself, 12% growth that happened in that business by looking at low-hanging fruits and investment in sales and marketing. But also now in 2024, if you start to look, that's 47% growth, and that's a combination of CMG growth, of 19%, and then the acquired growth that came along with it, right? So this kind of breaks it down that as we start to look at the overall growth, we are looking at growth from organic, and we are looking at growth from the acquired businesses. The key is that can you sustain it? Can you also add profitability into it as well?
So speaking about that, if you look at this cash position that CMG had, so 2023, around CAD 67 million that was sitting on the balance sheet. And if you look at the first sizable acquisition that CMG did in 2023, around CAD 23 million, and then you look at the overall balance on the balance sheet from a cash perspective, we almost replenished in terms of what we spent and what we had in 2023 from a cash position perspective. So it speaks a lot about the health of the business and how cash flow generation generative the core business is. That is very important because as we start to look at deploying capital, we also wanna make sure that the core business keeps humming out the cash that can then be used to do more acquisitions in the future.
So what is driving the acquisition? Why is acquisition important? What is the criteria for the acquisition? The way I'm gonna think of this, this is a visual of an upstream portfolio, that you see. It starts from seismic, and it goes all the way to economics. Again, realizing that the audience here is non-oil and gas, I will try to use one problem or a case study that was said to one of the conferences. One of the CEOs of the oil and gas company said that, "I wish I would, I can look at a piece of land, and I can tell from that piece of land how much money that asset will make for me for a sustained period of time."
Now, that's an easier problem to describe, but a very difficult problem to solve because to make a decision on that asset, because of the fact that you cannot see what's happening inside the ground, you need to have seismic data. Seismic is really taking pictures of the earth and then making interpretation on that. Then you need to apply all kinds of uncertainty on it.
Then from there, you are taking into static model that what does the reservoir really look like? How do I build a model around it and then start to break down into different cells, different grids, then apply rocks and fluids and the interaction of the gases around it? Then goes to drilling and completion. Then I do simulation, then I do production, and ultimately I'm doing an NPV analysis, and then there's a closed loop around it. That's how I get to solve that particular problem, which this oil and gas company CEO said. So that was definitely important to say. If you're looking at solving that particular problem, and if CMG is playing right now a role historically in the simulation market and with the product like CoFlow, we're entering into production and facilities, how do we then start to fill this white space? That is the key.
There was no right or wrong answer in terms of where do we start first. It happened to be seismic. And in seismic, we started that journey with Bluware as the first acquisition, and then Sharp Reflections came as the second acquisition. So really starting to build this platform of advanced science-focused technologies, which is an open ecosystem. Now, whenever you talk about platform, I know that word definitely makes investors antsy because when you, when a CTO talks about an investment about a platform, you definitely should get scared because there's the CapEx starting and there's a long-term project that's beginning. I have been in my career where we have done a lot of platforms, and the chances of platform definitely is less, right? So why are we taking the platform approach and what is different about it?
The difference really is that we want this platform to be an ecosystem. We want this platform to be open, extendable. So anytime when we do an acquisition, we have to look at synergies in terms of what makes sense to connect, what makes sense to leave it alone, how are we taking the data from one source and feeding back data into another, and making sure that not only you're connecting your own company's solutions, you're also connecting to competitor systems. You're creating that API layer where you can hook up to any kind of technology that's out there. That's how you start to build platform. That's important in this regard. So acquisition-wise, number one criteria for us is that it needs to meet our financial hurdle rate. Our financial hurdle rate publicly that we have disclosed is 20% IRR after tax.
Now, that's a very critical hurdle and a strict hurdle that rate we have to meet. And if you go lower than that, you want to communicate to the shareholders and talk about why that's. If you acquire a company and that doesn't give us that 20% because we never model synergy. We don't model synergy on the spreadsheets. It doesn't make sense. Synergies is always very difficult to implement compared to what you do in the models. So that's our starting point is that we want to look at businesses where we can really see growth that's happening, the disruptive technologies that we can invest in. The second aspect of that is, does it fit into our ecosystem? And I know this visual looks very simplistic, but there's a lot of opportunities and a lot of companies operating in each of the different segments, right?
Again, we don't have to fill the entire white space. We can partner. We have done those partnerships, or we can build, or we can completely ignore as long as there's a tight integration that's kind of built out over here. The third thing that's important to us is that if you wanna meet those IRRs, you want to think about, are these growth businesses, are these technology disruptors? Because you can have great products and great technologies, but they might lack the go-to-market machine. That's important as well for us to say, where can we add value, into it? These are three or four important characteristics as we start to look at it. Underpinning all of that is machine learning and AI and data analytics, right? They're kind of loosely held in this regard because you've got machine learning and AI, which is learning from different models.
They can be informed by physics as well, and then you have data analytics, which is getting trained on different types of insights coming from the data that's getting stored and getting consumed. So that is the way we look at it in terms of our acquisition strategy. Now, we have done three, three acquisitions so far. The first one, which is not mentioned over here, but I'll speak about that because that's a technology tuck-in that we did, a company called USI. It was a small company that we acquired for technology, very prevalent to what we wanted to solve in the U.S. market because, as I mentioned, the U.S. is a very competitive market.
It's about data analytics, and that was important for us to have either a solution that we can build, which would have taken us a couple of years to do that, or a solution that was available, a technology bought by that we did. But as we did that acquisition, I think it was late 2022 or early 2023. It was important that we treat that small tuck-in as a large acquisition. So we went through a proper diligence process. We spent close to three months of diligence process even for that small tuck-in. Why that was important? Because that was the first time CMG was doing an acquisition. So we wanted to build that muscle in the company and treat that as if it was a very, very large acquisition. So that was first on the data analytics side.
The other two that happened, Sharp Reflections is a recent one, but I'm gonna speak about Bluware and why Bluware is important. If you see this puzzle over here, it fits in the Sharp Reflections, sorry, in the seismic space. We started from Bluware because it happened to be that we're in the right place at the right time, but what Bluware really is, it's a great example of those technologies that are very disruptive, so why that is disruptive. Bluware is a technology that was built by a technologist from the gaming industry. In the gaming industry, high-performance computing matters. In the gaming industry, resolution and image quality matters. We are talking about oil and gas, and we are talking about seismic data. The data can go up to petabytes, so a huge amount of data.
So imagine doing any kind of analysis, any kinds of interpretation on it. It's gonna be very expensive resources-wise, can't even scale to that extent. So what Bluware technologist or CTO at the time thought about is, how can I take the gaming concept and apply that to the energy industry? So built up a format. A format is called Volume Data Store, VDS. And the idea is to take a traditional seismic data; it's a format and convert that into VDS format. To give you an analogy, maybe I'm dating some of you where you watched your movies in videotapes, VHS tapes. That's how the data was getting stored: tapes after tapes after tapes of oil and gas and seismic data. Now imagine that data now moving towards cloud, right? So you're talking about going from VHS all the way to Spotify.
That data move is happening because of the likes of VDS, which is a proprietary format that was built by Bluware technologists. So for us, it was important that we are paying emphasis on that disruptive technology, which can truly change the game. Another important thing that Bluware did was they created an open-source software called OpenVDS. So it's also seeding the software as an open software community out because then you create more users, and that users have a network effect that can help with the adoption of the commercial software. So VDS was one. The second aspect of that is, once you have the data, what do you do with it? As I mentioned, you're talking about terabytes of data, petabytes of data, but then you have to interpret, right? You have to figure out where the faults are, where the horizons are.
And when you're talking about a large amount of data, interpretation can take eight months, ten months. So imagine the time it takes, the efficiency that it lacks. So one of the products that Bluware has built on top of that VDS format is Interactiv AI. As the name suggests, it's really an interactive AI solution. Humans are, especially geologists and geophysicists, they have an inertia of just trusting the AI solution. But what if the solution is actually human-enabled? And that is what Interactiv AI does. So you are still training the machine. You are interacting with the machine, and when the answers come back from the machine, you are saying, "Well, that's not right. Here's how I'm gonna label it." So it's a labeling tool which gives that guidance back to the computer, and you're training the model on that.
And ultimately, you're spending 10% of your time, but you're making accurate decisions, and it's your solution versus a black box solution. So that's the key differentiator for Bluware. When we acquired the business, we also got a lot of services that came with it. But again, our goal was, and goal is, to keep investing in the software and start to see the top-line growth that happens through that. From a numbers perspective, the business was around 5% margin business. And if you look at CMG, CMG is 45% margin business. So clearly a dilutive, margin business. But again, the focus is software and how do you create that portfolio of solutions and how do you take that 5% margin business and take towards that 30%-40% margin, which is our North Star, from a margin expansion perspective. And that's not from services.
It's really from the software that we are trying to achieve through that. So that's Bluware. So as we fill the white space on that, we said, "Okay, we've done seismic. Plenty of opportunities still available." CMG is commercializing CoFlow, which is production, and that's again just one aspect of that. What else can we do, right? So we found another business, which is Sharp Reflections, happened to be in the seismic space. Now, because we were so active in seismic, we were attending all those conferences. We were able to meet the founder. This is a founder-led business, and it was built by leveraging one of the most premier institutes in Germany, Fraunhofer. So Fraunhofer is well known for building very scientific, very capable technologies. So the founder of Sharp Reflections comes from Exxon.
He was an Exxon employee who really found those challenges himself in terms of doing a better interpretation and better seismic processing. So now think about Bluware, where you have all the data, and then you are starting to do interpretation. But there's a step before that, which is you must have heard about all these boats and streamers in the sea and looking at taking shots of the earth because you're sending the sound waves down, and you're getting those images to say whether that's there is oil, there is a fault, there is a well that I can drill towards. So there's a lot of that activity happening. You take that data and you load them into tapes, which I talked about how the format is so old. But then you're also stitching the images together.
If I give you an analogy about JPEG images and how you're stitching those images together, you have so many images that you take from your digital camera, but then you have to build them all together. Oftentimes what happens is when you have a high, very lots of images, you make compromises on the quality, right? So you compromise on the pixel strength or pixel quality, and the image looks very different in terms of what was taken because it's good enough. In this case, if you start to make those compromises, you'll start to lose, and you will not be able to make the right calls because you will miss out on the horizon, you will miss out on the fault. So stitching is very important.
So when seismic processing finishes or about to get finished, there's an extra step that's called pre-stacking. Like, how do I take all those images and build them together and stitch them in the right way? So when my interpreter gets that, that becomes much more value-add, and there are no more mistakes, and there's less uncertainty around it. So that was the start of Sharp Reflections in terms of that pre-stacking software that they built together with Fraunhofer, and they found a couple of leading customers who helped build with that. One of the things I like about Sharp Reflections, as we did the diligence on this product, is that they built multiple modules.
So they have four or five products now over the last 15 years, 38 customers, a lot of big names using the product, and really a category creation because no other competitors do what they do, a lot of in-house solutions, but they built this using customers. So what they did was they built foundation projects. So 10 customers, 12 customers will join them, and they will participate. They will actually pay for it to be a member of that. So imagine building a roadmap and your feature set using customers paying for it, and then being your advocate to go out to the market and talk about how great that module is, what kind of value-add that they do. So Sharp went on that journey, and they have done five foundation projects, including 4D. 4D is time-lapse. Why is 4D important?
Again, as an example of, I will use carbon capture storage. As I mentioned, carbon dioxide is volatile. It's stored inside the ground, but it's not static. It moves. So when you are taking reimaging, you always want to track where carbon dioxide has moved because you don't want to leak. You don't want to have carbon dioxide coming up to surface because you have to always constantly report to the regulators about it. 4D has time lapse into it. Sharp Reflections has a good right away applicability to that. 4D is also optimizing in terms of, you know, how your overall optimization in terms of how oil and gas production looks like. So excited about how Sharp now is coming to the family and starting to make like a powerhouse from a subsurface perspective.
The way we want to run this now is that we have Bluware as coming as downstream, Sharp upstream. The data output of Sharp can be converted into VDS format. So the users will start to see a lot more synergies in terms of how they see it. We see back office synergies like centralizing HR, finance, and IT, and all those functions. But most importantly, that I'm excited about is you have almost the same user, and you have a same buyer. You're talking to those seismic, budget holders who are now gonna make a decision. So when your sales and marketing team are approaching the same buyer, your go-to-market, will be holistic. Your sales team will have much more levers to work with. You'll have much more pricing power in terms of negotiations that you do with it.
So that's the idea, and I wanted to take an example of these two solutions in terms of how we think about it. Because if you go back over here, that's a starting point for us. There's a lot of opportunity that we're gonna see in drilling side, completion side. We're gonna see opportunities in the production side, facility side. But as much as we find synergies from a user perspective and buyer perspective, we're gonna consolidate. We're gonna find that integration touchpoint, and we're gonna look at our org design in terms of how we run the go-to-market plan. Because these businesses, they have great products. They have differentiated technologies, but they don't have the margins, the margins that CMG has. And again, the goal is to grow the free cash flow per share.
For that to happen, we need to expand the margin profile of these businesses, and that will happen that we can come in with our CMG playbook. We call the CMG Operating System, where you can work with the founders, work with the sales team to say, "You know what? This is how you do product management. This is how you build the roadmaps. That's how you launch a product. That's how you enable the sales team to understand the value proposition of that particular feature." So you're less about feature functions but more about the so what that you can go to the market with. So that's the thinking around the acquisitions and how they kind of fit into the system. And if you look at overall, right, so you in 2022, you were one company. Fast forward to today, almost three years from now, there are three companies.
Where do we go, right, in the future? We do want to look at this entire upstream, and we want to be that surface and subsurface solution powerhouse. Again, we are not trying to become like, "Okay, you have to use all our CMG group solutions." But as I mentioned before, the platform approach, and I understand platform word can be scary, but really, if you do the integration right, where you're connecting the two products and the technology in a systematic manner, and you're finding those synergies and you're solving the use cases, you create that value proposition along the way. These businesses, they stand on their own. So when we look at IRRs, we look at the businesses by itself.
We are not modeling the synergies, but there are synergies that go in, and that synergies could be cost synergies, or the synergies could be growth profile synergies, that can happen on it, and if you do this right from overall building up the powerhouse for the upstream, we can, we can replicate that for any other verticals, whether that's mining industry, groundwater industry. There are so many adjacent verticals that we can start to look at because diversification is important to us, so again, it's very early stages for, for CMG to where, it needs to be, but it's on a right path. We have gone from one business to three businesses and a lot more to come, but we are learning. We're learning because we often get compared with the likes of whether you are a serial acquirer, whether you are an operator.
The answer really is that we are building our own playbook, and we are starting to look at both organic side of the growth business, whether we can combine the three together or take the go-to-market components of it, and also start to look at wherever it makes sense where we can add particular value to be acquirers as well of those businesses, oil and gas, outside of oil and gas. But again, I want to remind the investors, the goal is to create free cash flow per share for us, and it also creates a diversification. It creates a hedge for us. Within CMG, we are hedged by the fact that if oil and gas grows, we are in the right place. Energy transition grows, we are in the right place.
Now, for whatever reason, CMG takes the headwinds because of competition and the macro dynamics. We have Bluware and Sharp Reflections that are coming in as a portfolio, and that is the thinking around it to say, "How do we future-proof the business? How do we create a durable business, a growth business for long-term basis?" So with that, I'll take questions.
Great resolution. Thank you, Jain. How do you better understand kind of how you think about the net revenue retention profile for the core CMG business?
Yeah, so, it's important that we look at net revenue retention because we have a lot of customers who are either upselling or upping it, which means they're asking for more licenses, sometimes on a short-term basis, sometimes on a long-term basis. And we have customers also saying, "Well, right now we don't have a need for it." So the reason why we track that net revenue retention in this regard versus just an NRR in this space is because it's a share of wallet game, right? So we really want to understand in terms of the usage of the software of our business, and if for whatever reason they have declined their usage, what is that, and then how are we tracking towards it? And if they're coming back, why are they tracking towards it versus just a tracking customer attrition?
So is that, and I know you guys don't have to score with an NRR number, but is that you kind of have a ballpark for what the range is on a year-to-year basis?
It gets very murky because of the short-term nature of the contracts, right? So that's why we also don't report the ARR as well, because you have one-month contracts, you have three-month contracts, and if those customers don't come back or somebody else comes in, then the numbers really get messy.
Do you see a future where CMG will put out more disclosure on that, or is that kind of just the nature of the emerging industry?
I think the more and more businesses we're gonna acquire, we're gonna start to see because right now we are still very tied back to CMG core business where we see that kind of a behavior. And as we start to see, like Bluware is a good example, we don't see much of a short-term nature of that business. So the more diversification we can have over the period of time where sample size is bigger, I think we'll be in a good state to disclose. But right now, it's just gonna confuse investors versus helping them.
How do you all think about pricing and kind of what you're able to capture? Like, you're kind of, comment earlier about sort of performance space almost. Pricing. I mean, 87 million serving companies with hundreds of billions of revenue it just feels like there should be a lot more revenue, even if it's short-term in nature, I guess. What's the kind of story, I guess, on that front?
The industry really is coming of age when it comes to using technology, seeing technology as a revenue generation because historically they have seen technology as a cost center. So that's a mindset change that's happening. Industry is still very behind. Like, even cloud is a good example. All the other industries have caught up, and they're doing amazing things on cloud. Here, you won't believe it. There are pockets of regions where when you speak about cloud, they have a lot of inertia towards it. "Well, where's my data going?" I had a very interesting conversation with someone in the Middle East where they were arguing about the fact that, "I need to have a private cloud in my country because I don't want data to go." On the other hand, they're using Microsoft emails and sending all the stuff out through Excel.
I was having a conversation to say, "Where do you think that's going?" Right? I t's just a mindset change where technology really starts to become more of like a value-add and revenue generation play versus a cost center. It's gonna happen. It's happening. The second thing I would say is that how do you really put a value to it, right? Even simulation, right? Everybody knows it's important, and if you do it, if you don't do it, you're gonna pay for it by your bad decisions. But sometimes those bad decisions can take five years, six years, a longer period of time to really prove it that you did a suboptimal decision.
So when you can't articulate the clear value right away to say, "You know what?
If you invest in this, you're gonna get 10X or 20X," it becomes a different value proposition. Like, CoFlow is the product that we go out and pitch to the market. We know for a fact that we have measured that 5%-7% of production increase. And if an operator is making 100,000 barrels a day and you have oil price at $70 and you're improving by 5%, it more than pays for it, but yet we get inertia from the customers.
When you say the acquisitions are three-year and short-term, you already seem to, you say, integrate this game-changing resolution to help keep you that edge. What other technologies is CMG looking at to strike their leading M&A? Is there anything that you're looking to add specifically during this time? 'Cause you have replenished for almost replenished, since before.
Yeah, so the landscape for us is like, we're looking at close to 200 different M&A opportunities in this space. And then we start to apply the criteria in terms of valuation 'cause we don't want to overpay. We have to meet our IRR hurdle rates and then the fit within that. But there's a lot of disruptive technology that are happening, right? In drilling and completion space, there's a lot of Internet of Things technologies that are being used in terms of that sensor data. I talked about CCS. We are playing some small role today in terms of where should carbon dioxide be stored, but then right now the whole concept of digital twin. So you can pretty much emulate what's gonna happen beneath the ground by building the digital twin out.
A lot of that is going on, real-time production data. You really are not having a lag on it. You have this closed loop on it. Lots of disruption is happening in the economic space where you are really doing on-demand executive dashboards and insights that you're getting from that. One thing I do appreciate in this business because of technology and the likes of ChatGPT coming in and ML and AI is that the willingness for operators who try new technologies is increasing.
What's sort of the pipeline of things to buy? What's that? Is there like a dollar, like a revenue number for the pipeline that's out there? What do you buy?
We're keeping options open. So within, we have done a full landscape exercise in the upstream space. There are close to 800 opportunities we are tracking. Out of that 800, we are funneling down to 200 that we're looking at actively having conversations with the founder, building those relationships. Because once it gets into the broker process, we know it's gonna get very tight from a valuation perspective. But I would still say the expectations from some of these companies are still like, "We want to get paid as the same multiple as at least CMG is getting in a public market." That becomes a very tricky conversation because you don't have that 45 years, you don't have that healthy cash flows, you don't have 650 customers. You probably have four or five customers, large customer concentration.
How do you justify that kind of evaluation overall? So that 800 to 200 and then mapping down into small set of criteria and then working through the founders is important because we want to make sure when the time comes when they're ready to sell, they're able to look at this vision and then say, "Okay, we want to be part of that." Because strategics are trying to buy them. There are serial acquirers that are trying to buy them at low multiple. So what is CMG's MO when it goes to the market to say, "If you get bought by CMG, what value creation we can do for your business?" So for Sharp Reflections, for example, the story really was we are competing with a common competitor, right?
We want to ensure that we become the seismic powerhouse so that the business continues to grow and your people have more opportunities because no longer they just have to work in one company. They can now shift around and do other things.
Did you make a big stock with cash or?
Cash. All cash. One of the things that we have changed, as a compensation metric or compensation reward structure, is that even though we are a public company, historically CMG was issuing equity to the employees, and I would say one year ago we changed the metric or the reward basis by saying that if someone is making 10% bonus, we increase that to 15%, but we also said depending on your levels, 7.5% will go into cash, and then 7.5% we will use that cash to buy shares for you in the public market, and then you're gonna hold on to that for the next three years, so it does create a compounding effect, but it's not coming at the expense of shareholder dilution.