Martello Reports Financial Results for the Second Quarter of the 2025 Fiscal Year

In Q2 FY25 the Company strengthened its partner program, enhanced the customer experience, and accelerated product innovation to drive H2 Vantage DX revenue.

• After extensive collaboration with Managed Service Providers (MSPs) and market experts, the Martello Partner Network was launched subsequent to quarter-end, designed directly from partner insights and expertise.
• Vantage DX product innovation in Q2 FY25 included the release of a Microsoft Outage Early Warning feature, leveraging AI to make IT and partner operations more efficient when a Microsoft Teams service outage occurs.
• Martello continues to develop features in Vantage DX that support Microsoft Teams premium services, which are used by more than 75% of Teams Enterprise customers.
• The Company launched a new website, designed to increase traffic from qualified buyers and accelerate visitor conversion into opportunities.
• As part of its commitment to industry-standard data security and privacy, Martello completed a SOC 2 Type 1 audit for Vantage DX.
• The Company introduced initiatives to strengthen the Vantage DX customer experience, including the launch of an Early Adopters Program.
• The Mitel channel remains a large and stable source of margin and revenue in which Martello continues to invest. Multi-vendor solutions are becoming increasingly attractive to telephony and unified communications partners.
• Appointment of IT managed services leader Michael Contento to the Martello board of directors subsequent to quarter-end brings complementing expertise as the Company scales its Partner Network.

OTTAWA, ON, Nov. 14, 2024 /CNW/ – Martello Technologies Group Inc., (“Martello” or the “Company”) (TSXV: MTLO), a provider of user experience management solutions purpose-built for Microsoft Teams, Microsoft 365 and Mitel unified communications, today released financial results for the three months ended September 30, 2024. Martello’s software proactively detects performance issues before they impact users of these enterprise cloud communications and collaboration systems.

Terence Matthews, Chairman of Martello expressed his belief in the value of providing multi-vendor experience management to Mitel and its partners: “Managing the user experience across Mitel and Microsoft Teams delivers substantial value, allowing channel partners to differentiate and reduce the cost of supporting these enterprise communication and collaboration systems,” said Mr. Matthews. “Partners and telephony players recognize the opportunity to boost client satisfaction and retention, while also driving operational savings with Martello’s solutions.”

“Our targeted investments in H1 FY25 have set Martello up to accelerate Vantage DX growth through the partner channel”, said Jim Clark, Chief Executive Officer of Martello. “I’m thrilled that we have successfully launched the Martello Partner Network, onboarding several new partners with growth in our channel pipeline. We will continue to recruit, onboard and activate targeted partners and work together with them to deliver Vantage DX features that provide compelling value, particularly for Microsoft premium services such as Teams Phone, CoPilot for M365 and Teams Rooms, which are seeing rapid adoption globally as businesses seek to drive hybrid workplace productivity.”

Q2 FY25 Financial Highlights

• Revenue in Q2 FY25 was $3.64M representing a 9% decrease compared to Q2 FY24, due to expected declines in legacy product and support and maintenance revenue, partially offset by growth in Vantage DX revenue.
• Vantage DX monthly recurring revenue (“MRR”) increased by 5% in Q2 FY25 compared to Q2 FY24, both from direct sales and activities with partners. Vantage DX is the experience management solution that is purpose-built for Microsoft Teams. Vantage DX has contributed $1.23M in revenue in FY25 to date, a 10% increase compared to the same period in FY24.
• Sunsetting legacy product revenue declined by 11% or $0.18M in Q2 FY25 compared to Q2 FY24. The ongoing decline of legacy product revenue is proceeding as expected.
• Revenue from the Mitel business segment decreased by 10% in Q2 FY25 compared to the same period in the prior year. This decrease is attributable to a revenue mix change from various Mitel Performance Analytics offerings. The Mitel business continues to be a large and stable source of revenue and gross margin, representing 43% of total revenues in Q2 FY25 (compared to 44% in Q2 FY24) and 97% gross margin as a percentage of segment revenue.
• Revenue was 98% recurring in both Q2 FY25 and Q2 FY24.
• Gross margin as a percentage of total revenue was 86% in Q2 FY25, compared to 87% in Q2 FY24. The decrease is attributable to the higher cost of hosting software products on the cloud. Management continues to execute a strategy to reduce hosting costs. In addition, as the Company onboards new clients to existing cloud instances, the cost per client will continue to decrease.
• MRR decreased by 9% to $1.19M in Q2 FY25 compared to $1.30M in the prior year. The decrease is primarily attributable to changes in the mix of Mitel’s software assurance program and expected declines in legacy product revenue. MRR is a non-IFRS measure, representing average monthly recurring revenues earned in a fiscal quarter.
• Operating expenses were $4.20M in Q2 FY25 compared to $4.16M in Q2 FY24, a 1% increase. The nominal increase is driven by an increase in software costs, marketing and advertising and professional fees (consulting) partially offset by lower headcount costs and related variable compensation.
• The Company is investing in Vantage DX revenue growth as management monitors value for spend in all functions of the value chain.
• The Q2 FY25 loss from operations of $1.07M represented a 56% increase compared to $0.68M in Q2 FY24, due to the decrease in revenue as described above.
• The Adjusted EBITDA (a non-IFRS measure) was a loss of $0.58M in Q2 FY25, compared to $0.10M in the same period of FY24, attributable to the items described above.
• The Company’s cash and short-term investments balance was $4.57M as of September 30, 2024 (compared to $7.72M at March 31, 2024).

The financial statements, notes and Management Discussion and Analysis (“MD&A”) are available under the Company’s profile on SEDAR+ at www.sedarplus.ca, 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.