Adjusted EBITDA loss nears break-even
as MRR grows year over year.
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OTTAWA, ON, July 8, 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 of telephony and video conferencing for
more than 5,000 customers around the world, today released
financial results for the three months and fiscal year ended
March 31, 2020.
"As COVID-19 has disrupted the global economy, it has also
accelerated digital transformation, creating greater urgency for
organizations to deliver reliable remote collaboration services
such as video conferencing and office productivity solutions", said
John Proctor, President and CEO of
Martello. "As we focus on addressing this challenge, I'm
pleased that in Q4 FY2020 Martello has achieved monthly recurring
revenue growth and cut adjusted EBITDA losses dramatically to move
close to breakeven. This creates a stable and resilient foundation
from which to pursue the rapidly growing market for Microsoft Teams
and Office 365, with the acquisition of GSX. We believe our DEM
strategy will drive monthly recurring revenue growth, and as we
divest from the Company's SD-WAN division, we can focus on
accelerating this strategy".
Q4 and FY2020 Highlights
- By prioritizing Monthly Recurring Revenue ("MRR") growth and
ensuring responsible spending, Martello made significant progress
towards breakeven adjusted EBITDA with predictable and resilient
revenue streams.
- Monthly recurring revenue was $.99M in Q4 FY2020, an increase of 13% compared
to the same quarter during the prior year.
- Total revenue was $13.1M in
FY2020, and $3.3M in the fourth
quarter of FY2020, compared to $10.4M
and $3.4M in the same periods of
fiscal 2019. Annual revenue represents a 27% increase compared to
FY2019.
- The recurring portion of total revenue was 90% in Q4 FY2020 and
89% in FY2020, compared to 78% in Q4 and FY2019. This is due to the
continued shift from perpetual licenses to subscription sales in IT
Operations Analytics and to growth in UC Performance Analytics
revenue, which was 99% recurring in FY2020 compared to 95% in
FY2019.
- Organic revenue from sales of UC Performance Analytics software
to the Mitel channel in the three and twelve months ended
March 31, 2020 grew 25% in both
periods compared to the same periods in FY2019.
- Gross margin remained strong and consistent at 94.2% in Q4
FY2020 and 92.8% in FY2020, compared to 92.1% in Q4 FY2019 and
93.2% in FY19.
- One-time, non-cash impairment charges of $3.4M were recorded in Q4 FY2020, relating to
goodwill ($2.4M) and intangible
assets ($1.0M) of Elfiq. The Company
has made a strategic decision to divest itself of the SD-WAN and
link balancing business to focus on its DEM strategy, and expects
to benefit from the elimination of losses relating to this segment
in the near-term. The impairment charges are reflected in the
increased loss from operations in Q4 2020.
- Operating expenses decreased by $0.57M in Q4 FY2020 as compared to the prior
year, excluding the impact of the one-time non-cash impairment of
goodwill and intangible assets described above and
acquisition-related costs. This was the result of a strategic
initiative to reduce costs in view of the uncertainties surrounding
COVID-19, including delays in filling vacant positions and a
decision to reduce bonus accruals relating to FY2020. As well,
travel and event costs were reduced slightly due to cancellation of
events and reduced travel in view of COVID-19.
- Adjusted EBITDA, a non-IFRS financial measure which assesses
operating performance before the impact of one-time costs
associated with acquisition activity, impairment losses and other
non-cash costs, was a loss of $.15M
in Q4 FY2020, compared to a loss of $.83M in the same period of FY2019. On an annual
basis, adjusted EBITDA was a loss of $2.5M in FY2020, compared to a loss of
$1.7M in FY2019.
- The loss from operations was $4.6M in Q4 FY2020 and $8.3M in FY2020, compared to a loss of
$1.3M in Q4 FY2019 and $4.3M in FY2019. In Q4 FY2020, the increase in
the loss from operations resulted from the impairment charges of
$3.4M on Elfiq goodwill and
intangibles and $0.5M of costs
relating to the acquisition of GSX, offset in part by decreases in
operating expenses quarter over quarter. For FY2020, the increased
loss from operations resulted from the impairment charges, a full
year of amortization of intangibles ($0.4M) and operating losses ($0.9M) relating to the Savision acquisition ,
offset in part by lower acquisition costs in FY2020.
- The Company's cash and short-term investments balance was
$5.9M at March
31, 2020, compared to $6.6M at
March 31, 2019. Subsequent to
March 31, 2020, 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. 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.
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.
As COVID-19 continues to disrupt the global economy, Martello
has a core resilience and growing market opportunity that positions
the Company for future MRR growth. A focus in the 2020 fiscal year
on monthly recurring revenue and reducing operating expenses
yielded results in Q4 FY2020: 13% year-over-year MRR growth and
adjusted EBITDA near breakeven, despite COVID-19 economic
uncertainty.
Martello made several strategic decisions subsequent to Q4 FY20
to maximize its MRR growth opportunity in the DEM space.
To expand its DEM offering into the rapidly growing Microsoft
Office 365 space, Martello completed the acquisition of
Swiss-headquartered GSX, a Gartner-recognized DEM vendor that
specializes in Office 365. This strategic acquisition adds
significantly to Martello's MRR and diversifies Martello's revenue
stream, while offering access to an addressable market of 200
million monthly active users of Microsoft Office 365.
To ensure a strong focus on this growth market, as Martello
integrates GSX, the Company is divesting from the Elfiq SD-WAN line
of business, which is not aligned with Martello's renewed
SaaS-based DEM strategy and MRR growth focus. Discussions with a
third-party to purchase the assets of this division continue to
progress.
Martello upgraded its senior sales capabilities by 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.
Growth Strategy
To achieve DEM market dominance, Martello has a focused strategy
to expand the addressable market for its DEM monitoring and
analytics capabilities, bringing value to enterprises that rely on
cloud-based services.
The Mitel channel will continue to be important to Martello's
MRR growth and DEM strategy. As the world has shifted to remote
work, Martello supports many of the Mitel remote collaboration
platforms that are experiencing growth in demand, and earns a
royalty on sales of Premium Software Assurance for these. As Mitel
continues to provide its customers and partners with a path to
cloud communications, Martello has an increasingly important role
to play in delivering strong voice quality and user experience for
these Mitel solutions.
Microsoft is a key channel for Martello's DEM solutions, which
include Martello iQ, a service monitoring and analytics platform
that provides insight into the performance of key services such as
Microsoft Office 365. Martello will pursue large enterprise
opportunities in this segment along with strategic partnerships
such as the OEM relationship with Paessler, while presenting a
value proposition to the Microsoft community that leverages both iQ
and GSX solutions.
The successful integration of GSX is critical to Martello's DEM
strategy, and the Company is tracking several key milestones as
this process moves forward. These milestones include bringing GSX
Gizmo onto a multi-tenant cloud SaaS platform, achieving cross-sell
success in Mitel and Microsoft channels, and the development of new
partnerships that are beneficial to both Martello and GSX business
lines. We expect most integration activities to be complete within
12 months.
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.
Four 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 Wednesday, July 8,
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 July 8,
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 develops products and solutions that
provide monitoring and analytics on 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 unified communications performance
analytics 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
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