Demand for digital experience monitoring
accelerates, while acquisition of GSX helps drive 59% increase in
MRR year over year with 98% of revenues recurring.
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OTTAWA, ON, Aug. 27, 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 ended June 30, 2020.
Note that Martello acquired GSX Participations SA ("GSX"), a
provider of end-user experience monitoring solutions for Microsoft
365 on May 29, 2020, therefore these
results include one month of GSX financial information.
![Logo: Martello Technologies Group (CNW Group/Martello Technologies Group) Logo: Martello Technologies Group (CNW Group/Martello Technologies Group)](https://mma.prnewswire.com/media/1244520/Martello_Technologies_Group_Martello_Reaches__1_5M_in_Monthly_Re.jpg)
"We're very pleased with the revenue growth reported in this
quarter's results. After initial customer caution early in the
fiscal quarter related to COVID-19, demand for remote cloud
collaboration and productivity services accelerated throughout the
remainder of the quarter, bringing Martello new DEM deals",
said John Proctor, President and CEO
of Martello. "With our growing technology advantage, Martello is
well positioned to become the dominant player in the emerging DEM
market as adoption of cloud applications and services grows. We
will maximize this opportunity going forward, balancing
profitability with key investments to expand high margin monthly
recurring revenue, which we believe will maximize shareholder
value".
Q1 FY2021 Highlights
- Q1 FY2021 was an active and transformative quarter. To exploit
DEM market opportunities, the Company strengthened its balance
sheet through various transactions and initiatives: Martello
acquired GSX, completed a $6.9M
bought deal, closed two new financing arrangements, and made the
decision to divest its Network Performance Management (SD-WAN)
segment ("NPM segment"). Substantially all of the net assets of
this segment were sold to Adaptiv Networks subsequent to Q1
FY2021.
- The Company achieved positive adjusted EBITDA of $0.20M in Q1 FY2021, compared to a loss of
$.50M in the same period of FY2020.
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
Q1 FY2021.
- Results from the NPM segment are presented as discontinued
operations in the Q1 FY2021 and Q1 FY2020 statements of loss and
comprehensive loss, and the net assets sold to Adaptiv Networks are
presented as assets and liabilities held for sale in the statements
of financial position as at June 30,
2020. The comparative information presented herein excludes
results of operations of the NPM segment, except where
indicated.
- Q1 FY2021 revenues demonstrate growing industry demand for
digital workforce solutions, related to the global shift to remote
work. Although initial spending was cautious in April and May as
CIOs dealt with budget uncertainty related to COVID-19, in June
increasing demand for remote cloud collaboration capabilities
resulted in new DEM deals.
- At the close of Q1 FY2021, monthly recurring revenue reached
$1.46M, an increase of 59% compared
to $.92M in the same quarter during
the prior year, which includes MRR from the NPM segment.
- Total revenue was $3.33M in Q1
FY2021, compared to $2.76M in the
same period of fiscal 2020, representing a 21% increase year over
year.
- Operating expenses were $4.2M in
Q1 FY2021, as compared to $3.2M in Q1
FY2020. The increase of $1.0M related
to one-time acquisition-related costs of $0.8M, acquisition of GSX intangibles of
$0.13M, and $0.55M in GSX operating expenses. Excluding these
items, operating expenses decreased by $0.47M 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
base salaries, and reduced headcount.
- The recurring portion of total revenue was 98% in Q1 FY2021,
compared to 93% in Q1 FY2020.
- Revenue from sales of UC Performance Analytics software through
the Mitel channel in the three months ended June 30, 2020 increased by 6% to $1.9M compared to $1.8M reported for the same period in
FY2020.
- Gross margin remained strong and consistent at 94.2% in Q1
FY2021, compared to 93.8% in Q1 FY2020.
- Positive adjusted EBITDA in Q1 FY2021 reflects Martello's
prudent response to COVID-19 related uncertainty in the quarter, as
the Company implemented temporary risk management measures
including decreased headcount, salary reductions, reduced travel
and other expenses and reduced its focus on the NPM line of
business. As Martello exploits its growing market opportunity in
fiscal 2021, the Company will review these measures and balance
profitability with key investments for high-margin, high quality
revenue growth, to maximize shareholder value.
- The loss from operations was $1.1M in Q1 FY2021, compared to a loss of
$0.6M in Q1 FY2020. Costs associated
with discontinued operations of the NPM segment, which was divested
subsequent to Q1 FY2021, were $0.4M
($0.2M in Q1 FY2020), and one-time
transactional costs associated with the acquisition of GSX were
$0.8M.
- The Company's cash and short-term investments balance was
$6.7M at June
30, 2020, compared to $5.9M at
March 31, 2020. In Q1 FY2021,
Martello raised $6.9 million in a
bought deal offering, which funded a portion of the purchase price
of GSX, with the remainder used for working capital and general
corporate purposes. In addition, Martello completed a term loan
financing with Vistara Capital Partners for USD$8 million, which funded a portion of the
purchase price of GSX, and closed an MRR-based revolving facility
of up to $7.5 million with National
Bank of Canada. The National Bank
revolving facility remains undrawn. The Company is confident,
subject to risk factors associated with the ongoing COVID-19 crisis
that it retains sufficient available cash and working capital to
fund organic growth plans going forward.
Business Highlights
As workplaces became increasingly digitized and distributed in
response to COVID-19, adoption of Microsoft 365 accelerated. This
growth, which included a 70% increase in daily active users of
Microsoft Teams video conferencing, increased demand for GSX Gizmo.
GSX Gizmo monitors the user experience for Microsoft 365, which
includes Microsoft Teams. In Q1 FY2021 Gizmo added 10% more users
than the same quarter of the previous year, as customers migrated
Microsoft 365 solutions to the cloud from on-premise to support
remote work initiatives.
For example, in June 2020, GSX won
business from a large governmental organization with more than a
million employees. COVID-19 accelerated the timing of this deal, as
the organization responded to global work from home directives.
GSX Gizmo displaced a key competitor in Q1 FY2021 to win a
six-figure enterprise deal with one of the world's most
recognizable Fortune 500 brands, as they migrated from on-premise
to cloud to support remote workers.
Early in Q1 FY2021, usage of the remote access capabilities in
Martello's Mitel Performance Analytics (MPA) software doubled, as
its customers sought solutions to troubleshoot on-premise systems
remotely. Usage of the Company's web-based UCScore.com tool was
made widely available during COVID-19 to anyone who wished to test
their home network's fitness for voice and video calls, and this
resulted in a 34% increase in tests during Q1 FY21. Among MPA
renewals in Q1 FY2021, 65% of IPT users were in the healthcare,
education or government sectors.
Martello's partnership with Paessler resulted in incremental
sales wins at the close of the quarter.
Outlook
Martello's mission is to provide the industry's clearest picture
of the digital user experience, as a leading vendor in the
enterprise DEM market.
Remote work has become the 'new normal' in response to COVID-19,
and has marked an inflection point in the shift towards a true
digital era for the workplace, giving digital workplace tools and
strategies a 'must-have' status, rather than 'nice to have'. With
global workforces increasingly distributed, it is expected that
digital workplace trends will continue to accelerate, as businesses
look to implement digital replacements for in-person activities. In
the Martello business, rapid growth in the user base for Microsoft
Teams this spring and an accelerated move to cloud-based tools by
enterprises has increased demand for digital experience monitoring
solutions, as businesses seek better control and insight into how
their users are experiencing these tools.
Third-party research released by Gartner in July 2020 validates the important role that DEM
solutions play in accelerated digital workplace activities. In
three reports, GSX/Martello is recognized as a key DEM vendor. On
the need for DEM solutions, the Hype Cycle for the Digital
Workplace, 2020 report noted that "Organizations that implement
DEM tools can not only benefit from better application performance
and improved user experience, but also ultimately improve business
outcomes in support of digital transformation."
Martello has several competitive advantages as it pursues
dominance in this emerging growth market for DEM, including the
capacity to correlate multiple data points to provide insight into
performance problems and the user experience in a way that is
deeper and more proactive than competitors, as well as the
industry's most comprehensive approach to Microsoft 365 user
experience monitoring.
Integration of GSX
In May 2020, to expand its DEM
offering into the rapidly growing Microsoft 365 space, Martello
completed the acquisition of Swiss-headquartered GSX, a
Gartner-recognized DEM vendor that specializes in Microsoft 365.
This strategic acquisition adds significantly to Martello's MRR and
further diversifies Martello's revenue stream, while offering
access to an addressable market of 200 million monthly active users
of Microsoft 365.
The integration of GSX into the Martello business is a critical
and complex factor in the success of this acquisition. As such,
Martello has an integration team in place driving core initiatives
and investments, particularly in product development and sales. The
Company is focused on these core integration objectives, guided by
a mandate to maintain and grow existing monthly recurring revenue
streams.
Martello upgraded its senior sales capacity in June 2020, appointing Mike Danforth as VP, Global Sales and
Partnerships, to drive growth for our DEM solutions in both the
Mitel and Microsoft channels with global partners and through
direct sales. Mr. Danforth has strong relationships with industry
players like PWC, Salesforce, Accenture, Deloitte and Microsoft,
and a proven track record of bringing value to customers and
partners. Mr. Danforth is leading an integrated sales team
that is focused on driving monthly recurring revenue through large
direct and indirect deals with global systems integrators and
managed service providers, including cross-selling iQ and Gizmo in
the Microsoft ecosystem.
Product development activities are focused on driving value for
customers of Martello's DEM products, while expanding the
addressable market for iQ and Gizmo into small and medium sized
businesses (SMBs) and managed service providers with the
development of cloud-based multi-tenancy for these products.
Martello continues to work closely with Mitel, to drive growth
in MPA sales through both Premium Software Assurance attachment and
the support of Mitel's cloud-hosted unified communication
solutions, such as MiCloud Flex on Google Cloud. Martello earns a
royalty on Mitel Premium Software Assurance and MiCloud Flex on
Google Cloud Platform.
Although there is significant global economic uncertainty
resulting from COVID-19 which may further impact operations, at
this time the Company is confident that it retains sufficient
available cash and working capital to fund organic growth over the
next year.
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.
Conference Call Details
Martello will host a conference call and audio webcast with
John Proctor, President & CEO
and Erin Crowe, CFO at 8:00 AM Eastern Time on Thursday, August 27,
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 August 27,
2020 at
https://martellotech.investorroom.com/quarterly-results.
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
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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.
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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