40% of the Company's $4.6 million in total revenues in Q3 FY21 was
generated by the Microsoft DEM business, demonstrating growing
customer demand.
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OTTAWA, ON, Feb. 17, 2021 /CNW/ - Martello Technologies
Group Inc., ("Martello" or the "Company") (TSXV:MTLO), a leading
developer of enterprise digital experience monitoring ("DEM")
solutions for thousands of customers around the world, today
released financial results for the three months and nine months
ended December 31, 2020. Martello
software makes the user experience for cloud applications and
services such as video conferencing and unified communications (UC)
both reliable and productive.
Most of Martello's revenue is derived from two market segments,
UC performance analytics for Mitel customers, and DEM solutions
primarily for Microsoft 365 users. Martello's DEM solution
suite includes Microsoft user experience monitoring software
(Gizmo) and digital experience analytics software (iQ), which
combined, are defined herein as Martello's Microsoft DEM revenue.
Martello's legacy product revenue is derived from its Live Maps and
Domino products.
"As Martello completed the integration of GSX, we saw growth in
our Microsoft DEM business in the third quarter of fiscal 2021, and
we continued to generate high margin recurring revenue", said
John Proctor, President and CEO of
Martello. "Our previously described focus on the growing market for
Microsoft DEM solutions resulted in growth both in Microsoft users
on our platform and Microsoft DEM revenue, compared to the second
quarter of fiscal 2021. With more than 2 million Microsoft users
relying upon Martello DEM in Q3 FY21 to stay productive whether at
home or the office, we are making product investments to address
the IT challenges of remote work. These investments, as well as
those to enhance product scalability, are expected to create
valuable competitive differentiators for Martello and access to new
indirect sales channels for our DEM solutions."
Q3 FY21 Highlights
- In Q3 FY21, Martello completed the integration of GSX and made
progress on key DEM product innovation initiatives which are
expected to expand the Company's addressable market and increase
the number of Microsoft users on Martello's platform. At the end of
Q3 FY21, there were 2.17 million Microsoft users on the Company's
DEM platform.
- Revenue of $4.63M was 61% higher
in Q3 FY21 than the $2.88M reported
for the same quarter in the prior year, and continued to diversify,
with the following year over year segment performance:
-
- The acquisition of GSX contributed $1.88M to the year-over-year increase, and 41% of
total revenues (nil in Q3 FY20).
- Mitel UC performance analytics revenue increased by 5% or
$.10M, contributing 42% of total
revenues (56% in Q3 FY20).
- IT Service Analytics revenue decreased by $.23M or 23%, contributing 17% of total revenues
(30% in Q3 FY20). The decrease in this segment was due to the shift
from perpetual to recurring revenue, and an expected revenue
decline from the legacy product (Live Maps) in this segment.
- Sequential results from Q2 FY21 to Q3 FY21 offer further
insight into the trajectories of Martello's key DEM solutions and
declining legacy product lines:
-
- Microsoft DEM revenue grew by 17%, representing 40% of total
revenue in the quarter (36% in Q2 FY21).
- Legacy product line revenue declined by 16%, offsetting DEM
growth. Legacy product revenue as a whole represented 17% of total
revenue in Q3 FY21 (21% in Q2 FY21).
- In Q3 FY21, monthly recurring revenue ("MRR") reached
$1.49M, a 64% increase over Q3 FY20
MRR of $0.91M, excluding the
discontinued NPM segment, and a 4.9% sequential increase compared
to Q2 FY21. The year over year increase in MRR is due in part to
the addition of acquired GSX revenues, which contributed
$0.61M in MRR in Q3 FY21 as well as
increased royalties from UC performance analytics. These increases
were offset by reduced license and maintenance and support revenue
primarily related to legacy products. 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 was 96% in Q3 FY21,
compared to 94% in Q3 FY20.
- Gross margin remained strong and stable, decreasing slightly to
93% in Q3 FY21, compared to 94% in Q3 FY20.
- Operating expenses increased by 53% or $1.89M to $5.45M in
Q3 FY21, compared to $3.56M in Q3
FY20. The increase reflects $1.99M in
GSX operating expenses, including $0.34M in amortization of intangibles (nil in
FY20). Excluding the impact of GSX, operating expenses decreased by
3% between Q3 FY20 and Q3 FY21. This was due to decreases in Sales
and Marketing and General and Administrative expenses, partially
offset by an increase of $0.12M in
Research and Development. Expense decreases resulted from the
implementation of strategic cost reduction initiatives early in
FY21, related to uncertainties around the COVID-19 pandemic.
- Adjusted EBITDA (a non-IFRS measure) in Q3 FY21 was a loss of
$0.26M, compared to a loss of
$0.84M in the same period of FY20.
The improvement in Adjusted EBITDA is due to the sale of the NPM
segment in Q2 FY21 as well as the implementation of temporary
measures related to COVID-19 risks, including reduced travel and
event expenses and reduced salaries for a portion of the reporting
period.
- Loss from operations increased by $0.29M to $1.13M
compared to a loss of $0.84M in the
same period of FY20. Amortization of GSX intangibles increased
expenses, while revenue increased and was partially offset by other
operating expenses related to GSX.
- In addition to the items above, the Company incurred higher
interest expense in Q3 FY21 as compared to Q3 FY20, due to a higher
rate and balance on the term loan facility established earlier in
FY21.
- The Q3 FY21 net loss of $1.46M
($0.01 per share) has increased from
$1.33M in the same period in FY20
($0.00 per share) as a result of the
items outlined above. In addition, Q3 FY20 included a loss from
discontinued operations of $0.51M
(nil in Q3 FY21).
- The Company divested the assets of the NPM segment 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.
- Year-to-date total revenue increased by 48% to $12.36M compared to $8.34M for the same period in the previous year.
Gross margins reported year-to-date were 94%, stable compared to
gross margins of 94% reported for the same period last year.
Adjusted EBITDA year-to-date was a gain of $.24M compared to an adjusted EBITDA loss of
$2.31M for the first three quarters
of FY20.
- The Company's cash and short-term investments balance was
$4.05M at December 31, 2020, compared to $5.9M at March 31,
2020. Although there is significant global economic
uncertainty resulting from COVID-19 which may further impact
operations, at this time the Company believes operations can be
funded by available cash and other available funding sources.
Outlook
Martello's mission is to be a leading vendor in the enterprise
DEM market, making every user's digital experience exceptional and
productive. The Company's DEM solutions give IT teams actionable
intelligence to proactively deliver a positive digital experience
for users.
Martello had 2.17 million Microsoft users on its platform as of
December 31, 2020. In Q2 FY21, the
Company reached 2 million Microsoft users and is targeting to
increase this number by 60% by the end of FY22. Having completed
the integration of GSX in Q3 FY21, Martello is well positioned to
accelerate Microsoft user growth in FY22. According to Gartner in a
July 2020 report, 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. To drive
this growth and support the initiatives outlined herein, Martello
will continue to make the necessary investments in product
development, customer success and indirect sales channel
development.
Product Development
Martello recognizes that product innovation is important to the
Company's successful growth in FY22 and beyond. Projects in
development through Q3 FY21 were focused on improving the
scalability and differentiation of Martello's DEM solution, to
expand the Company's addressable market.
Cloud-Based Multitenancy - The latest evolution of
cloud-based multi-tenancy capabilities for Microsoft DEM will be
available in Q2 FY22, unlocking the indirect channel of MSPs,
and their small and medium sized enterprise clients. Multi-tenancy
allows a Martello managed service provider ("MSP") to view and
manage multiple customers from a single instance of Martello's
software, rather than logging into multiple instances. As a result,
Martello can onboard MSPs and their customers easily and
cost-effectively in the future, to drive additional revenue growth
in FY22 and beyond.
Work from Anywhere Solutions (Real User Monitoring and End to
End Network Path Visualization) - Recognizing the increasingly
distributed nature of today's workforce, Martello's Microsoft DEM
product program is focused on meeting the demands of the 'work from
anywhere' digital workforce. By adding Real User Monitoring,
expected to be released in Q2 FY22 and end-to end network
visualization capabilities, expected to be released in Q1 FY22 to
its DEM platform, IT teams can quickly pinpoint whether problems
are related to the cloud provider, ISP, or the user's network. This
allows for better IT support of remote workers. These new
capabilities, when combined with Martello's existing synthetic
monitoring and digital experience analytics, differentiate
Martello's DEM platform from competitors' offerings. As more
enterprises deal with the challenges of remote workers, the
addition of these capabilities is expected to increase the number
of Microsoft users on Martello's DEM platform and increase the
average cost per user over time.
Sales Activity
Martello's DEM platform improves the Microsoft 365 user
experience for its customers, with a set of solutions that combine
acquired products (Gizmo, iQ) with new product capabilities
developed organically. Martello's total addressable market for its
DEM solution includes the more than 200 million global users of
Microsoft 365, representing approximately a million enterprises
worldwide (Statista, April 2020).
Martello's sales strategy is focused on winning large enterprise
sales deals, cross-selling and upselling its DEM solutions to its
existing customer base and developing the Company's indirect sales
network. In Q3 FY21, Martello announced the following enterprise
sales deals:
- A global financial institution in Asia purchased a Gizmo subscription for more
than 85,000 users, supporting their migration to Microsoft 365.
This deal was won through a joint effort with Microsoft via their
Co-Sell program.
- A European mechanical engineering company renewed their
subscription for 5,000 Microsoft 365 users and added 2,000 more
users to a new two-year subscription.
- One of the world's largest Microsoft partners signed a
partnership deal with Martello earlier in the year, which resulted
in the addition of almost 50,000 users in Q3 FY21 alone.
Both Savision BV (Vantage Dx Analytics - IT Service Analytics)
and GSX (Vantage Dx Monitoring – Microsoft 365) were acquired by
Martello with certain products which support legacy third-party
technology. As a result, Martello is seeing declines in these
revenue streams with some customers migrating to Martello's newer
software platforms on renewal. In Q3 FY21, this amounted to a 16%
decline in this legacy revenue stream from the prior quarter.
In the short-term, Martello's overall growth rates will continue to
be partially offset by a decline in the revenue related to these
legacy products. There are minimal expenses related to this
revenue.
Partnerships and Indirect Sales Channels
Martello has developed indirect sales channels for its products
and is focused on expanding its MSP network. Having onboarded one
of Microsoft's largest MSPs in 2020, the Company is actively
recruiting new MSPs for its Microsoft 365
DEM solution. As these new MSPs are onboarded, the
Company expects meaningful growth in the number of Martello DEM
users.
Sales from the OEM relationship with Paessler have remained
strong, with organizations from a broad range of industries such as
healthcare, government and telecommunications choosing
their unique large enterprise monitoring and analytics
solution, in subscription deals from 1-3 years in length.
Via the Microsoft Co-Sell program, the Company's Microsoft Gold
partner status and other initiatives with Microsoft, Martello is
further extending its reach across Microsoft globally.
Martello's Co-Sell Prioritized status, provided to a select subset
of Co-Sell vendors, entitles Martello to promote and showcase its
solutions to millions of customers in Microsoft's commercial
marketplace, access Microsoft marketing channels, and jointly sell
innovative solutions to create valuable customer relationships.
This provides greater access to Microsoft's enterprise, corporate
and small and medium accounts, to grow Martello's partner and
customer base and increase users on the Martello platform.
The Company's relationship 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 Mitel customers and partners.
Many of Mitel's channel partners also provide Microsoft 365 to
their customers and can benefit from Martello's single vendor
solution that monitors the performance of a customer's unified
communications and productivity tools, maintaining the reliability
of both. The early DEM solution that Martello has delivered to
thousands of Mitel customer networks globally since 2010 has given
Martello in-depth knowledge of and insight into managing the
performance and user experience of real-time cloud services. This
has provided the Company with a competitive advantage as it
pursues its goal of DEM market leadership.
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 Thursday, February 18,
2021.
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 February
18, 2021 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 second issue of Martello's quarterly Investor Newsletter
will be sent to subscribers in March
2021. 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 Microsoft 365 end user experience
monitoring, unified communications performance analytics, and IT
service analytics. 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
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 information contained
in this news release include, among others, statements with respect
to accelerating user growth by providing performance and user
experience monitoring; and the expectation to increase the number
of Microsoft end users by 60% during fiscal 2022.
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.
- 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, 2020 dated December 24,
2020, which is available on the Company's profile on SEDAR
at www.sedar.com.
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