Strong quarterly growth with revenues of
$3.1 million up 136% over the prior
year, operating expenses reflect deal costs and the establishment
of core capacity to target and acquire revenue extension
assets.
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OTTAWA, Feb. 26, 2019 /CNW/ - Martello Technologies
Group Inc., ("Martello" or the "Company"), a leading provider of
technology solutions that deliver clarity and control of complex IT
environments deployed in thousands of locations around the world,
today released financial results for the third quarter of its 2019
fiscal year, including the three and nine months ended December 31, 2018.
Q3 2019 Highlights
- The Company reported third quarter revenues of $3.1 million, representing an increase of 136%
compared to the same period in the prior year and an increase of
57% over Q2 F2019.
- Nine-month revenue is $7.0
million, an increase of 105% over the same period in fiscal
2018.
- Recurring revenue is 76% in the third quarter of fiscal 2019
and 78% for the year to date.
- Organic revenue from sales of Martello's network performance
management software to the Mitel channel grew 44% in Q3 F2019
compared to Q3 F2018.
- The Company's revenue base continued to expand and diversify,
with sales of network performance management software to the Mitel
channel contributing 55% of revenues in Q3 F2019, compared to 90%
in the same period of Q3 F2018.
- Gross margin was 93.7% for the nine months ended December 31, 2018, compared to 94.7% for the
corresponding period of the 2018 fiscal year.
- The loss from operations in Q3 F2019 was $1,337,262, compared to a loss of $18,961 in Q3 F2018. Year to date, the loss from
operations is $2,957,683 compared to
$314,283 for the nine months ended
December 31, 2017.
- Adjusted EBITDA, a non-IFRS financial measure which assesses
operating performance before the impact of costs associated with
acquisition activity and other non-cash costs, amounted to a loss
of $269,704 for the three months
ended December 31, 2018 and
$862,034 for the nine months ended
December 31, 2018. This compares to
income of $251,382 and $183,530 for the three and nine months ended
December 31, 2017.
- Martello has made investments in the current year in people and
systems, which has established a core capacity to target and
acquire revenue extension assets.
"The successful execution of our strategy has resulted in steady
revenue growth and diversification this quarter", said John Proctor, President and CEO of Martello.
"The Company's revenue grew both organically and through
acquisitions this quarter, with strong recurring revenue and
healthy gross margins, fueled by the acquisitions of Savision and
Elfiq and growing demand for Martello's products. Investments made
this year in people and systems have created a strong foundation
for future acquisitions and revenue growth".
Business Update
During the third quarter Martello achieved the following
milestones:
- Acquired Netherlands-based IT
analytics and visualization company Savision B.V. ("Savision"),
extending its capabilities in IT and network performance analytics,
and significantly expanding its European sales presence.
- In conjunction with the acquisition of Savision B.V., closed a
financing with Royal Bank of Canada ("RBC") for new loan facilities. The
financing includes a term loan of $3
million, and a revolving facility of up to $1 million.
- Joined the BlackBerry L-Spark Accelerator Program to develop
next generation network performance management solutions for
autonomous vehicles and IoT.
- Bolstered the Company's leadership team with the appointment of
Mike Galvin and Jennifer Camelon to its Board of Directors.
Subsequent Activities
Subsequent to December 31, 2018,
Martello signed an amendment to its agreement with Mitel Networks,
a key partner. The terms of the amendment are expected to be
favourable to Martello's revenues, and include expanding the
coverage of Martello's software to additional Mitel communications
platforms, and extending the renewal term.
Financial Information
Martello reported third quarter 2019 revenues of $3.1 million, representing an increase of 136%
compared to the same period in the prior year and an increase of
57% over Q2 2019. Nine-month revenue was $7.0 million, an increase of 105% over the same
period in fiscal 2018.
Gross margin as a percentage of revenue was 93.9% in the three
months ended December 31, 2018,
compared to 95.5% in the three months ended December 31, 2017.
The Company had 191,205,568 shares issued and outstanding as of
December 31, 2018. On November 1, 2018, in connection with the
acquisition of Savision, 18,709,090 common shares were issued.
Statement of
operations -
Summary
|
|
(in CAD
$000's)
|
Three months
ended
December
31,
|
Nine months
ended
December
31,
|
|
2018
|
2017
|
2018
|
2017
|
Sales
|
3,089
|
1,307
|
6,991
|
3,408
|
Gross
margin
|
2,901
|
1,248
|
6,551
|
3,229
|
Expenses
|
4,238
|
1,267
|
9,509
|
3,543
|
Loss from
operations
|
(1,337)
|
(19)
|
(2,958)
|
(314)
|
Net
loss
|
(1,019)
|
(9)
|
(4,343)
|
(444)
|
Comprehensive
loss
|
(488)
|
(9)
|
(3,813)
|
(444)
|
Weighted average
shares outstanding
|
|
|
|
|
Basic
|
185,037,737
|
85,272,689
|
159,069,848
|
82,530,553
|
Net loss and
comprehensive loss per share
|
|
|
|
|
Basic
|
($0.00)
|
($0.00)
|
($0.02)
|
($0.01)
|
EBITDA
(1)
|
(987)
|
(14)
|
(4,191)
|
(412)
|
Adjusted
EBITDA (1)
|
(270)
|
251
|
(862)
|
184
|
|
(1) Non-IFRS
financial measures
|
|
EBITDA is a
non-IFRS financial measure and is defined as net loss before
interest income, interest expense, accretion of
long-term debt, income tax recovery and depreciation and
amortization.
|
|
ADJUSTED
EBITDA is a non-IFRS financial measure and is calculated as
EBITDA excluding share-based compensation
expense, reverse acquisition costs, acquisition-related costs and
foreign exchange gain/(loss).
|
Balance Sheet –
Summary
|
As
at
|
(in
CAD$000's)
|
December 31,
2018
|
March
31,
2018
|
Cash
|
6,727
|
2,141
|
Working
Capital
|
7,074
|
3,038
|
Assets
|
32,425
|
10,776
|
Liabilities
|
11,439
|
3,947
|
Share capital and
contributed surplus (1)
|
31,025
|
13,057
|
Accumulated
deficit and cumulative translation adjustment
|
10,040
|
6,228
|
|
|
(1)
The Company had 191,205,568 shares
issued and outstanding as at December 31, 2018 (110,463,366 as at
March 31, 2018).
|
The Company had $7.1 million in
working capital as of December 31,
2018 to fund operations and growth.
Sales
Sales represent:
(a) the sale of network performance management solutions for
real-time communications, the majority of which is
subscription-based;
(b) the sale of hardware and software link balancing and
bandwidth management solutions, and maintenance and support
services for these solutions; and
(c) the sale of perpetual and subscription software
licenses for visualization of IT systems management data, and
maintenance and support services for these solutions.
Recurring revenue, which was 76% of total revenues in the third
quarter of fiscal 2019 and 78% year to date, includes fees earned
on a monthly per-user basis, fees earned monthly from device usage
and revenue from subscription to software licenses, all from
performance analytics for unified communications ("UC"). In
addition, recurring revenue includes maintenance programs on
hardware and software link balancing and bandwidth management
solutions; subscription sales, maintenance and support on the
licenses for visualization of IT systems management data; and
support for UC enterprise management software.
Martello realized 44% growth in organic revenues for its network
performance management software in Q3 F2019, compared to Q3
F2018. This organic growth is solely from the Mitel channel
and excludes Elfiq and Savision revenue.
In addition, Q3 2019 included sales from Elfiq Networks and two
months of sales from Savision. Elfiq was acquired
December 15, 2017 and Savision was
acquired on November 1, 2018,
therefore the comparable quarter and year to date in F2018 includes
only half a month of Elfiq's results ($125,430).
Sales and Gross
Margin – Three months ended December 31, 2018
(in CAD
$000's)
|
|
2018
|
|
|
|
Total
|
Elfiq
|
Savision
|
Remaining
balance*
|
2017
|
Variance
|
Sales
|
3,089
|
690
|
688
|
1,711
|
1,307
|
404
|
Cost of goods
sold
|
188
|
114
|
7
|
67
|
59
|
(8)
|
Gross
margin
|
2,901
|
576
|
681
|
1,644
|
1,248
|
396
|
|
* To facilitate
comparison with fiscal year 2018, the remaining balance represents
the results of the Company's
operations in fiscal year 2019 without contributions from Savision
(acquired in fiscal year 2019) and Elfiq (acquired
December 15, 2017). The analysis compares the Remaining
balance to the comparable period in FY2018.
|
Cost of goods sold represents the costs of hardware,
installation and delivery, sales commissions and web services.
The Company's revenue base continued to expand and diversify in
this reporting period, with sales of network performance management
software to the Mitel channel contributing 55% of revenues in Q3
F2019, compared to 90% in the same period of F2018.
Expenses
In the current year the Company has made investments in people,
research and development and sales and marketing activities, and
foundational systems which will enable the company to scale.
In doing so, Martello has established the core capacity for future
organic growth and acquisition activity.
Expenses – Three
months ended
(in CAD
$000's)
|
|
31 December
2018
|
31
|
|
|
Total
|
Elfiq
|
Savision
|
Remaining
balance*
|
December
2017
|
Decrease/
(Increase)*
|
Research and
development
|
1,083
|
295
|
244
|
544
|
522
|
(22)
|
Sales and
marketing
|
945
|
384
|
352
|
209
|
153
|
(56)
|
General and
administrative
|
1,249
|
183
|
246
|
820
|
356
|
(464)
|
Depreciation
|
30
|
7
|
7
|
16
|
14
|
(2)
|
Amortization
|
224
|
-
|
-
|
224
|
-
|
(224)
|
Acquisition-related
costs
|
707
|
-
|
-
|
707
|
222
|
(485)
|
TOTAL
|
4,238
|
869
|
849
|
2,520
|
1,267
|
(1,253)
|
|
* To facilitate
comparison with fiscal year 2018, the remaining balance represents
the results of the Company's
operations in fiscal year 2019 without contributions from Savision
(acquired in fiscal year 2019) and Elfiq (acquired
December 15, 2017). The analysis compares the Remaining
balance to the comparable period in FY2018.
|
For the 3 months ended December 31,
2018, operating expenses were $4,238,267, an increase of $2,971,547 over Q3 2018. Excluding Elfiq and
Savision results for the quarter, operating expenses increased
$1,252,494. During the quarter,
the Company incurred non-recurring costs due to investment in
research and advisory services, implementation costs associated
with new systems, and professional fees due to additional
complexity around the reverse acquisition transaction and
acquisition. Additionally, investment has been made in the
current year to strengthen the executive team and add new systems
to enable future revenue growth.
Research and development expenses included salaries and other
benefits and compensation for the research and development team as
well as any subcontract costs and development tools. These
costs are partially offset by government grants, including
investment tax credits which are earned from qualifying Scientific
Research and Experimental Development ("SRED") expenditures, and by
NRC IRAP funding.
Research and development costs and sales and marketing costs
increased primarily due to increases in compensation costs year
over year, including share-based compensation. General and
administrative costs increased due to compensation increases, new
executive roles, additional audit, legal and accounting fees and
research and advisory services.
Year to date, salaries and share-based compensation expense
increased, relating to additional executive staff, the accelerated
vesting of certain stock options as a result of the RTO, and an
expanded finance team. As well, professional fees for
accounting, audit, tax and legal increased due to the additional
complexity associated with the reverse acquisition transaction and
public company reporting. Costs in the current year also include
investment in research and advisory services and in new systems,
which were not incurred in the prior year.
Amortization of intangible assets relates to intangibles
established on the acquisition of Elfiq and Savision.
Acquisition related costs in the three months ended December 31, 2018 relate to audit and due
diligence costs, as well as the success fee paid to the M&A
advisors for the closing of the Savision acquisition. In the
prior year, acquisition related costs relate to the acquisition of
Elfiq.
Loss from Operations
The loss from operations in Q3 F2019 was $1,337,262, compared to a loss of $18,961 in Q3 F2018. Year to date, the loss from
operations was $2,957,683 compared to
$314,283 for the nine months ended
December 31, 2017.
EBITDA and Adjusted EBITDA Summary (Non-IFRS financial
measures)
The Company's "EBITDA" and "Adjusted EBITDA" are non-IFRS
financial measures used by management that do not have any
standardized meaning prescribed by IFRS and may not be comparable
to similar measures presented by other companies. EBITDA is
calculated as net loss before interest income, interest expense,
accretion of long-term debt, income tax recovery, depreciation and
amortization. Adjusted EBITDA is calculated as EBITDA
excluding share-based compensation expense, reverse acquisition
costs, acquisition-related costs and foreign exchange
gain/(loss). Management believes Adjusted EBITDA is a useful
financial metric to assess its operating performance on an adjusted
basis as described above.
Adjusted EBITDA amounted to a loss of $269,704 for the three months ended December 31, 2018 and $862,034 for the nine months ended December 31, 2018. This compares to income of
$251,382 and $183,530 for the three and nine months ended
December 31, 2017.
|
|
|
|
|
|
|
|
|
|
Loss from
operations, EBITDA and
Adjusted
EBITDA
|
|
|
December
31,
2018
|
|
December
31
2017
|
|
December
31,
2018
|
|
December
31
2017
|
|
|
|
(3 months
ended)
|
|
(9 months ended)
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations
|
|
$
|
(1,337,262)
|
|
(18,961)
|
|
(2,957,683)
|
|
(314,283)
|
EBITDA
|
(1)
|
$
|
(986,902)
|
|
(14,362)
|
|
(4,190,956)
|
|
(411,576)
|
Adjusted
EBITDA
|
(1)
|
$
|
(269,704)
|
|
251,382
|
|
(862,034)
|
|
183,530
|
|
|
|
|
|
|
|
|
|
|
(1) Non-IFRS
financial measures
|
The financial statements and notes 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.
Conference Call Details
Martello will host a conference call and audio webcast with
John Proctor, President & CEO
and Erin Crowe, CFO at 10:00 AM Eastern Time on February 26, 2019.
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 26, 2019.
About Martello Technologies Group
Martello Technologies Group Inc. (TSXV: MTLO) is a technology
company that provides clarity and control of complex IT
infrastructures. The company develops products and solutions that
monitor, manage and optimize the performance of real-time
applications on networks, while giving IT teams and service
providers control and visibility of their entire IT infrastructure.
Martello's products include SD-WAN technology, network performance
management software, and IT analytics software. Martello
Technologies Group is a public company headquartered in
Ottawa, Canada with offices in
Montreal, Amsterdam, 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
The forward-looking statements contained in this news release
are made as of the date of this news release. Except as required by
law, the Company disclaims any intention and assume no obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by applicable securities law. Additionally, the Company
undertakes no obligation to comment on the expectations of, or
statements made, by third parties in respect of the matters
discussed above.
SOURCE Martello Technologies Group