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Loss from operations improves 42% as cost optimization
stabilizes. Vantage DX market continues to develop and
repayment of debt subsequent to quarter-end provides additional
runway for revenue growth.
- Steps taken to reduce costs and manage debt more effectively
have improved Martello's adjusted EBITDA by 69%, with outstanding
debt maturity now extended to 2026.
- The Microsoft-recommended Vantage DX platform monthly
recurring revenue (MRR) increased by 232% compared to Q1
FY23.
- Mitel business line continues to provide a stable and
profitable recurring revenue base with a 2% increase in Q1 FY24 to
$1.79M.
- Sunsetting Legacy product revenue declined by 25% in Q1
FY24, causing Martello's total revenue to decline year over
year.
- Chairman Terence Matthews
provided USD$3M in additional debt
financing to repay the remaining Vistara debt in full, extending
the maturity date to 2026. This demonstrates his continued
confidence in the Vantage DX opportunity.
OTTAWA,
ON, Aug. 21, 2023 /CNW/ - Martello
Technologies Group Inc., ("Martello" or the "Company") (TSXV:MTLO),
a provider of software that optimizes the Microsoft Modern
Workplace environment, today released financial results for the
three months ended June 30, 2023.
Martello software provides businesses with actionable insights on
the performance and user experience of cloud services such as video
conferencing and voice calls, with a focus on Microsoft 365,
Microsoft Teams and Mitel unified communications.
"Almost everyone has experienced the frustration of a Microsoft
Teams meeting marred by audio or video issues, or a failure to
connect," said Terence Matthews,
Chairman of Martello. "Senior executives consistently communicate
to me that these challenges impact productivity, erode customer
experiences, and diminish employee satisfaction. With Martello
Vantage DX, organizations can harness the full potential of the
modern workplace, unburdened by the interruptions stemming from IT
infrastructure issues."
"Legacy product revenue declines were a forecasted headwind in
Q1 FY24. The proactive measures we've taken to streamline costs and
manage debt in FY23 will set Martello up for success," said
John Proctor, President and CEO of
Martello. "We are focused on driving Vantage DX revenue growth and
continuing to develop our strong Mitel business. As legacy product
revenue sunsets, we expect overall revenue growth will deliver
value to shareholders."
"I'm pleased with actions taken this year to optimize spend with
a focus on aligning Vantage DX with the significant market share
gains of Microsoft Teams," said Jim
Clark, Chief Financial Officer of Martello. "Vantage DX
continues to deliver value towards quantifiable improvements in
business productivity. Our annual operating plan is focused on
expanding market penetration and revenue with the help of important
partnerships, including Microsoft, Orange Business Services and
CGI." Clark added, "The recent refinancing of the Martello debt
provides several benefits. Settling the Vistara debt earlier has
provided additional runway to deliver net accretive growth and
positive adjusted EBITDA while deferring the cash outlay until
August 28, 2026."
Q1 FY24 Financial
Highlights
Financial Highlights
|
June 30,
|
|
June 30,
|
(in 000's)
|
2023
|
|
2022
|
|
(Three months
ended)
|
Sales
|
4,004
|
|
4,178
|
Cost of Goods
Sold
|
481
|
|
463
|
|
|
|
|
Gross Margin
|
3,523
|
|
3,715
|
Gross Margin
|
88.0 %
|
|
88.9 %
|
Operating
Expenses
|
4,285
|
|
5,024
|
Loss from operations
|
(762)
|
|
(1,309)
|
Other
income/(expense)
|
(562)
|
|
162
|
Loss before income tax
|
(1,324)
|
|
(1,147)
|
Income tax recovery
(expense)
|
117
|
|
(79)
|
Net loss
|
(1,208)
|
|
(1,226)
|
Total Comprehensive
income (loss)
|
(1,156)
|
|
(1,943)
|
|
|
|
|
EBITDA (1)
|
(288)
|
|
(1,159)
|
Adjusted EBITDA (1)
|
(201)
|
|
(645)
|
|
|
|
|
(1) Non-IFRS
measure. See "Non-IFRS Financial Measures".
|
|
|
|
- Revenue in Q1 FY24 was $4.0M
representing a 4% decrease compared to Q1 FY23. As Vantage DX
revenue grew year-over-year and Mitel revenue remained stable,
sunsetting Legacy product revenue declined by 25%, causing the
decline in total revenue.
- Vantage DX is Martello's key modern workplace optimization
business. In Q1 FY24 Vantage DX MRR grew by 232% compared to Q1
FY23, both from net new clients and conversion of clients from
legacy products to Vantage DX. Total Vantage DX revenue in Q1 FY24
was $0.51M, compared to $0.15M in Q1 FY23.
- Sunsetting legacy product revenue declined by 25% or
$0.57M in Q1 FY24 compared to Q1
FY23. The ongoing decline of Legacy product revenue is proceeding
as planned. The Company is executing a strategy to convert certain
Legacy customers to the Vantage DX platform.
- The Mitel business remains a stable and profitable source of
recurring revenue and cash with Q1 FY24 seeing a marginal positive
exchange rate impact. The Mitel business represented 45% of total
revenues in Q1 FY24 (42% in Q1 FY23).
- Revenue was 98% recurring in Q1 FY24 compared to 99% in Q1
FY23.
- Gross margin as a percentage of revenue was 88% in Q1 FY24
compared to 89% in Q1 FY23. The marginal decrease is attributable
to the increased cost of inventory due to higher Mitel hardware
sales and an increase in third-party software subscription resale
in Q1 FY24 compared to Q1 FY23. This is partially offset by lower
hosting costs in Q1 FY24 compared to Q1 FY23, as the Company
executes a multi-year action plan to reduce these costs.
- MRR was $1.31M in Q1 FY24
compared to $1.38M in the prior year,
a 5% decrease attributable to declining subscriptions and related
maintenance and support on sunsetting Legacy products. MRR is a
non-IFRS measure, representing average monthly recurring revenues
earned in a fiscal quarter.
- Operating expenses decreased 15% to $4.29M in Q1 FY24. The decrease is attributable
to the cost optimization exercise launched in Q2 FY23, which
included headcount reductions combined with lower vendor
spend.
- Q1 FY24 Loss from Operations of $0.76M represented a 42% improvement compared to
$1.31M in Q1 FY23. The improvement is
primarily attributable to cost optimization efforts initiated in Q2
FY23.
- The Adjusted EBITDA (a non-IFRS measure) loss improved by 69%
to $0.20M in Q1 FY24 compared to
$0.65M in Q1 FY23. This is primarily
attributable to the cost optimization described above.
- The Company's cash and short-term investments balance was
$3.73M as of June 30, 2023 (compared to $2.22M at March 31,
2023). Working capital will significantly improve with the
recent debt refinancing described above.
Conference Call Details
Martello will host a conference call with John Proctor, President & CEO and
Jim Clark, CFO at 8:00 AM Eastern Time on Tuesday, August 22, 2023
to discuss the Q1 FY24 financial results.
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 ask to join the Martello call. An audio recording of the
call will be available on August 22,
2023 at
https://martellotech.com/investors/#earnings.
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.
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.
About Martello Technologies
Group
Martello Technologies Group Inc. (TSXV: MTLO) is a technology
company that provides digital experience monitoring (DEM) solutions
to optimize the modern workplace. The company's products provide
actionable insight on the performance and user experience of cloud
business applications, while giving IT teams and service providers
control and visibility of their entire IT infrastructure.
Martello's software products include Vantage DX, which provides
Microsoft 365 and Microsoft Teams end user experience monitoring
and optimization. Martello is a public company headquartered in
Ottawa, Canada with employees in
Europe, North America and the Asia Pacific region. Learn more at
http://www.martellotech.com
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 Information
This news release contains "forward-looking information"
within the meaning of applicable Canadian securities legislation.
Forward-looking information 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
and " includes, but is not limited to, statements with respect to
activities, events or developments that the Company expects or
anticipates will or may occur in the future including the execution
of a multi-year action plan to reduce hosting costs, the aim that
as legacy product revenue sunsets, overall revenue growth will
deliver value to shareholders, the execution of a strategy to
convert certain Legacy customers to the Vantage DX platform, and
the significant improvement in working capital with the recent debt
refinancing.
Forward-looking information is neither a statement of
historical fact nor assurance of future performance. Instead,
forward-looking information is 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 information relates to the future, such statements
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
information. Therefore, you should not rely on any of the
forward-looking information. Important factors that could cause our
actual results and financial condition to differ materially from
those indicated in the forward-looking information include, among
others, the following:
- Continued volatility in the capital or credit markets and
the uncertainty of additional financing.
- 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.
- and other risks disclosed in the Company's filings with
Canadian Securities Regulators, including the Company's annual
information form for the year ended March
31, 2021 dated January 7,
2022, which is available on the Company's profile on SEDAR
at www.sedar.com.
Any forward-looking information provided by the Company in
this news release is based only on information currently available
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 information, 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 Inc.