Monthly recurring revenue grows by more than
60% year over year.
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OTTAWA, ON, Nov. 17, 2020 /CNW/ - Martello Technologies
Group Inc., ("Martello" or the "Company") (TSXV: MTLO), a developer
of enterprise digital experience monitoring ("DEM") solutions that
improve the user experience for cloud applications and services
such as video conferencing and telephony for more than 5,000
customers around the world, today released financial results for
the three months and six months ended September 30, 2020.
"I'm pleased with the 63% year over year growth in Martello's
high-quality revenue," said John
Proctor, President and CEO of Martello. "We continue to
focus on the performance of our DEM strategy. While this long-term
strategy requires investment over the next several quarters to
increase future MRR, I'm pleased that just one quarter after
acquiring GSX and enhancing our position in delivering DEM,
momentum is growing. Microsoft 365 and Teams have become
critical business services, and third parties such as Gartner are
increasingly recognizing Martello as a key DEM vendor keeping these
services performing reliably for users."
Results this quarter reflect significant recent events in
Martello's strategy to become a leading DEM vendor, including the
acquisition of GSX in May 2020, debt
financings with National Bank and Vistara Capital and an
oversubscribed $6.9M bought deal in
Q1 FY21 co-lead by PI Financial Corp. and Eight Capital, as well as
the sale of the network performance management (NPM) segment early
in Q2 FY21.
Q2 FY2021 Highlights
- In Q2 FY21, Martello continued to execute on its long-term DEM
strategy. In just four months following the acquisition of GSX, the
Company added more than 450,000 Microsoft 365 users, reaching 2
million users on its Gizmo platform. In addition, bookings,
revenues and renewals of its iQ service analytics platform rose.
Ongoing investments to build the sales pipeline offer the potential
to expand monthly recurring revenue in future quarters. The
integration of GSX has progressed well and is nearing
completion.
- Revenue of $4.40M is 63% higher
than the $2.69M reported for the same
quarter in the prior year. The acquisition of GSX contributed
$1.73M to the year-over-year
increase. Vantage Dx Monitoring – Mitel UC revenue increased by
$0.05M (3%), offset by a decrease of
$0.08M (9%) in revenue from Vantage
Dx Analytics - IT Service Analytics.
- In Q2 FY21, monthly recurring revenue reached $1.42M, a 63% increase over Q2 FY20 MRR of
$0.87M, excluding the discontinued
NPM segment. The increase in MRR is due to the addition of GSX
revenues, which contributed $0.56M in
MRR in Q2 FY21. MRR is a non-IFRS measure and represents average
monthly recurring revenues earned in a fiscal quarter. The MRR
measure offers insight into the predictability of Martello's
current and future revenue streams.
- The recurring portion of total revenue remained stable at 96%
in Q2 FY21, compared to 97% in Q2 FY2020.
- Revenue continues to diversify, with Vantage Dx Monitoring –
Mitel UC contributing 42% of revenues in Q2 FY21 compared to 58% in
Q2 FY20, Vantage Dx Monitoring – Microsoft 365 (GSX) contributing
39% of revenues in Q2 FY21 compared to nil in Q2 FY20 and Vantage
Dx Analytics - IT Service Analytics contributing 19% in Q2 FY21
compared to 29% in Q2 FY20. In Q2 FY20, the now divested and
discontinued NPM segment contributed 13% of revenue.
- Gross margin remained strong and stable at 95% in Q2 FY21,
compared to 93% in Q2 FY20.
- The Company achieved positive adjusted EBITDA of $0.30M in Q2 FY21, compared to a loss of
$.99M in the same period of FY20.
Adjusted EBITDA is a non-IFRS financial measure which assesses
operating performance before the impact of one-time costs
associated with acquisition activity, impairment losses, other
non-cash costs as well as the impact of discontinued operations in
FY21. Positive adjusted EBITDA in Q2 FY21 reflects a slight
increase in gross margins, temporary risk management measures in
response to COVID-19 related uncertainty, as well as
reclassification of the NPM segment as discontinued operations. The
Company will continue to be opportunistic in making investments to
accelerate MRR and revenue growth, which may impact short-term
operating results.
- Operating expenses for the quarter increased by $1.45M to $4.76M,
from $3.31M in Q2 FY20. The increase
reflects $1.94M in GSX operating
expenses, including $0.33M in
amortization of intangibles. Excluding the impact of these items,
operating expenses decreased by $0.50M or 15% compared to the same quarter last
year. The decrease in expenses is related to COVID-19 reductions in
travel and marketing activities, as well as temporary reductions in
salaries and other compensation.
- Loss from operations decreased by $0.22M to $0.58M in
Q2 FY21, compared to a loss of $0.80M
in the same period of FY20. Revenue and gross margin increases were
partially offset by increased expenses relating to the acquisition
of GSX, including amortization of GSX intangibles and acquisition
related expenses.
- In addition to the items above, the Company incurred higher
interest expense on the Vistara term loan, partially offset by
foreign exchange gains in the quarter.
- The Company divested the assets of the NPM segment in Q2 FY21
for total proceeds of $0.83M,
consisting of cash of $0.43M, a
promissory note receivable of $0.10M
and an investment in the acquiring entity of $0.30M. A gain of $0.22M was recognized on the divestment,
contributing to a gain from discontinued operations of $0.10M in Q2 FY21. The results of the NPM segment
are reported as discontinued operations for all periods presented
in the financial statements, and herein, except where
indicated.
- As a result of the above explained items, the net loss for Q2
FY21 was $0.94M, compared to a net
loss of $1.50M in Q2 FY20.
- The Company's cash and short-term investments balance was
$4.17M at September 30, 2020, compared to $5.9M at March 31,
2020. The Company is confident, subject to risk factors
associated with the ongoing COVID-19 crisis that it retains
sufficient available cash, working capital and available revolver
to fund organic growth plans going forward.
Business Highlights
Martello's DEM strategy is yielding early results in the first
complete quarter following the acquisition of GSX. The Company has
continued to grow its sales pipeline, with some
larger enterprise prospects. While these larger opportunities
have longer sales cycles, they may contribute significantly to MRR
growth over time. Martello's 96% recurring revenue provides greater
predictability and stability, with the revenue impact of each
booking recognized over the term of the subscription, which can be
up to 36 months.
In Q2 2021, Martello saw increased bookings, revenue and
renewals for its iQ service analytics solution, in part due to a
focus on converting legacy Live Maps customers to iQ. Key
highlights of the Company's iQ sales progress this quarter
included:
- A US law firm with more than 1,000 employees that had been a
Live Maps customer since 2015 moved onto iQ. The firm's move to
Microsoft 365 provided an opportunity to sell iQ and Gizmo. The
customer chose to implement both tools to manage Microsoft 365
performance and user experience, converting from legacy Live Maps
software to Martello's DEM products.
- A global insurance company with more than 5,000 employees
purchased iQ as an upgrade to the Live Maps software they had in
place. This sales win had a total value of $246,000 over the lifetime of a 3-year
subscription, featuring multiple integrations, including Microsoft
365, ServiceNow and Azure.
- Sales from the OEM partnership with Paessler exceeded the
Company's expectations, with large organizations from a broad range
of industries such as healthcare, government and telecommunications
choosing this unique monitoring and analytics solution, many in
3-year subscription deals.
The Company's partnership with Mitel remains strong, with
activities focused on growing Mitel Performance Analytics (MPA)
sales in several key Mitel offerings. Martello is also working on
strategies to sell iQ and Gizmo to customers and partners of Mitel.
For example, a large Mitel distributor and MSP already using MPA to
proactively manage voice performance for their customers is
pursuing a complete Martello DEM solution, adding iQ and Gizmo.
Together, these solutions provide an end-to-end view of Microsoft
365, voice performance and user experience.
While Martello added more than 450,000 Microsoft 365 users to
its Gizmo platform since acquiring GSX, in Q2 FY21 Gizmo also
detected a global Microsoft 365 outage, notifying its users before
other available methods. This proactive detection can help
enterprises to reduce support costs and led to an increase in
inbound sales inquiries immediately following the outage.
The integration of GSX into Martello has progressed well since
the Company acquired the Swiss-based DEM software provider in
May 2020 and is nearing completion.
In Q2 FY21, Martello reached key milestones in the integration of
GSX, including strengthening sales, partnerships and client
delivery capacity, as well as integrating teams and key systems.
The development of cloud-based multi-tenancy for Gizmo and iQ is
progressing well.
Outlook
Martello's mission is to become a dominant vendor in the
enterprise DEM market, making every user's digital experience
productive. The Company's DEM solutions give IT teams actionable
intelligence to proactively deliver a positive digital experience
for users.
Martello is taking a systematic approach to executing its DEM
strategy. In Q2 FY21, these efforts have created the foundation for
the Company's next phase of growth and have yielded early results.
Progress on this strategy is expected to continue in the near to
medium term and will drive MRR growth over time. As third-party
recognition of its market opportunity grows and the Company's sales
pipeline strengthens, Martello will invest over the next several
quarters in delivering and accelerating this sales pipeline,
expanding the Company's addressable market with key product
functionality such as cloud-based multi-tenancy, and in
successfully completing the integration of GSX. This
investment may impact short-term operating results, as the Company
positions itself to accelerate MRR and revenue growth in future
quarters.
Market Trends
Keeping employees productive while working remotely with cloud
suites such as Microsoft 365 is critical to businesses and has
elevated insight into the user experience from 'nice to have' to
'must have'. To take control of cloud service delivery, it is
becoming clear that the most critical performance metric that will
matter to CIOs in the future will be the user experience.
The world's most widely adopted cloud productivity suite is
Microsoft 365, used by more than a million enterprises globally
(Statista, April 2020). As the
global workforce shifted to work from home beginning in
March 2020 in response to the
COVID-19 pandemic, the Microsoft Teams video conferencing
application has been among the most in-demand tools in this
suite. In October 2020,
Microsoft noted that its Microsoft Teams cloud video conferencing
solution has grown 50% since April
2020, to 115 million daily active users.
Martello's DEM solutions allow IT teams to take control of the
Microsoft 365 user experience. According to Gartner in a
July 2020 report1, more
than 50% of enterprises using Microsoft 365 will use a third-party
monitoring tool to manage the user experience by 2024, up from just
10% today. The report recognizes Martello among just three
companies that provide this solution today with a focus on
Microsoft 365.
Martello has garnered additional third-party recognition for its
DEM solutions. In October 2020,
Enterprise Management Associates (EMA) a leading industry analyst
firm identified Martello as a Vendor to Watch, defining Martello's
DEM approach as proactive and practical, benefitting from the
distinctive combination of its Gizmo and iQ products:
"Work-from-anywhere is here to stay. That fact makes Microsoft 365
not only mission-critical, but mission-centric. Martello's pedigree
in this discipline and its end-to-end reach logically make it a
Vendor to Watch."
11. Gartner: "Leverage Office 365,
Monitoring Practices to Improve Availability and Eliminate
Performance Challenges", July 21, 2020
|
Product Development
Martello recently expanded its Microsoft Teams monitoring
capabilities, launching advanced video monitoring which collects
data and metrics from Teams video calls to help IT teams to
validate video performance from any location. Measuring and
monitoring metrics that matter to video performance such as FPS
(frames per second), bitrate and pixilation, this feature puts a
focus on the visual experience of Teams calls, which is important
to true end user experience analytics.
Product development continues to focus on delivering
capabilities that deepen customer insight into the user experience,
while expanding Martello's addressable market. The development of
cloud-based multitenancy in Gizmo and iQ is a key project for
Martello's R&D team, allowing the Company to offer its solution
to mid-market and small businesses.
Conference Call Details
Martello will host a conference call with John Proctor, President & CEO and
Erin Crowe, CFO at 8:00 AM Eastern Time on Wednesday, November 18,
2020.
Canada/USA Toll Free:
1-800-319-4610
International Toll:
+1-604-638-5340
Callers should dial in 5 – 10 min prior to the scheduled start
time and simply ask to join the Martello call. An audio recording
of the call will be available on November
18, 2020 at
https://martellotech.investorroom.com/quarterly-results.
The financial statements, notes and Management Discussion and
Analysis ("MD&A") are available under the Company's profile on
SEDAR at www.sedar.com, and on Martello's website at
www.martellotech.com. The financial statements include the
wholly-owned subsidiaries of Martello. All amounts are reported in
Canadian dollars.
Three institutional investment firms provide research coverage
of Martello. The Company does not endorse the research of
third-party institutions.
Upcoming Activities
The Company will launch a quarterly Investor Newsletter in
December 2020. To join the mailing
list, complete the Subscribe form on Martello's website.
About Martello Technologies Group
Martello Technologies Group Inc. (TSXV: MTLO) is a technology
company that provides digital experience monitoring (DEM)
solutions. The company's products provide monitoring and analytics
on the performance and user experience of critical cloud business
applications, while giving IT teams and service providers control
and visibility of their entire IT infrastructure. Martello's
software products include unified communications performance
analytics, Microsoft 365 end user experience monitoring and IT
service monitoring and analytics. Martello Technologies Group is a
public company headquartered in Ottawa,
Canada with offices in Amsterdam, Geneva, Nice, Paris, Dallas
and New York. Learn more at
http://www.martellotech.com.
This press release does not constitute an offer of the
securities of the Company for sale in the
United States. The securities of the Company have not been
registered under the United States Securities Act of 1933, (the
"1933 Act") as amended, and may not be offered or sold within
the United States absent
registration or an exemption from registration under the 1933
Act.
This press release shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of
the securities in any state in which such offer, solicitation or
sale would be unlawful.
Neither the TSXV nor its Regulation Services Provider (as
that term is defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this news
release.
Cautionary Note Regarding Forward-Looking
Statements
This news release contains "forward-looking statements".
Forward-looking statements can be identified by words such as:
"anticipate," "intend," "plan," "goal," "seek," "believe,"
"project," "estimate," "expect," "strategy," "future," "likely,"
"may," "should," "will" and similar references to future periods.
Examples of forward-looking statements include, among others,
statements we make regarding accretive monthly recurring revenues
and effect of closing on the Company's gross margins.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
our current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections,
anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, the following:
- Continued volatility in the capital or credit
markets.
- Our ability to maintain our current credit rating and the
impact on our funding costs and competitive position if we do not
do so.
- Changes in customer demand.
- Disruptions to our technology network including computer
systems and software, as well as natural events such as severe
weather, fires, floods and earthquakes or man-made or other
disruptions of our operating systems, structures or
equipment.
- Delayed purchase timelines and disruptions to customer
budgets, as well as Martello's ability to maintain business
continuity as a result of COVID-19.
Any forward-looking statement made by us in this news release
is based only on information currently available to us and speaks
only as of the date on which it is made. Except as required by
applicable securities laws, we undertake no obligation to publicly
update any forward-looking statement, whether written or oral, that
may be made from time to time, whether as a result of new
information, future developments or otherwise.
SOURCE Martello Technologies Group