Mr. John Proctor reports

MARTELLO REPORTS FINANCIAL RESULTS FOR THE FOURTH QUARTER AND 2023 FISCAL YEAR

Martello Technologies Group Inc. has released financial results for the three and 12 months ended March 31, 2023. Martello software provides businesses with actionable insights on the performance and user experience of cloud services such as video conferencing and voice calls, with a focus on Microsoft 365, Microsoft Teams and Mitel unified communications.

"In my many conversations with large enterprise and government executives, it is evident their focus is on improving business productivity, customer experience and employee satisfaction," said Terence Matthews, chairman of Martello. "These are all areas where the Martello Vantage DX software has a positive impact optimizing the environment that Microsoft Teams operates in. The timing is right for this product, and I remain confident that the Martello team can accelerate client and sales opportunities, as well as identify productive partnerships."

"While legacy product decline continues to be a headwind impacting top-line revenue, I am very pleased with the double-digit Vantage DX monthly recurring growth quarter over quarter through fiscal 2023," said John Proctor, president and chief executive officer of Martello. "This growth was the result of our partnerships with Microsoft and Orange Business Services, continued Vantage DX product innovation, the unwavering support of Martello's chairman, and the hard work of our people. Getting to over one million Vantage DX user licences in the first year is a great sign of market demand."

"Martello is exiting fiscal 2023 with a strong base of more than one million Vantage DX user licences, a focused strategy for fiscal 2024, and an annual operating plan, which will deliver sought-after enhancements for our three stakeholder groups: employees, customers and shareholders," said Jim Clark, chief financial officer of Martello. "The improvements in financial performance in fiscal 2023 reflect management's deepening focus on delivering value to the front of our client's businesses."

• Revenue in fiscal 2023 was $16.1-million, representing an 8-per-cent decrease compared with FY 2022. Fourth quarter FY 2023 revenue of $4.03-million represents a 6-per-cent decrease compared with $4.27-million in Q4 FY 2022. As Vantage DX revenue grew year over year and Mitel revenue remained stable, sunsetting legacy product revenue declined more rapidly than anticipated in FY 2023, causing the decline in total revenue.
• Vantage DX is Martello's key growth business. In FY 2023, Vantage DX MRR grew by 612 per cent to $160,000, and there were more than 1.1 million Microsoft users monitored by the Microsoft-recommended platform. Total Vantage DX revenue in FY 2023 was $1.25-million, compared with $80,000 in FY 2022.
• Sunsetting legacy product revenue declined by 25 per cent or $2.51-million in FY 2023 and $70,000 in Q4 FY 2023 compared with Q4 FY 2022. The continuing decline of legacy product revenue is proceeding as planned, with the exception of the off-boarding of a large legacy partner, which is now complete. The company is executing on a strategy to convert certain legacy customers to the Vantage DX platform.
• The Mitel business line remained a stable and profitable source of recurring revenue, increasing in Q4 FY 2023 by 1 per cent to $1.80-million compared with $1.78-million in Q4 FY 2022. The increase is attributable to favourable currency conversion. Mitel revenue in FY 2023 was $7.15-million, a 1-per-cent decrease compared with $7.25-million in FY 2022. The Mitel business line represented 44 per cent of total revenues in FY 2023 (41 per cent in FY 2022).
• Revenue was 99 per cent recurring in FY 2023 compared with 98 per cent in FY 2022.
• Gross margin as a percentage of revenue was 88.5 per cent in FY 2023, compared with 90.7 per cent in FY 2022. The small decrease is primarily attributable to the higher cost of hosting software products on the cloud and an increase in the cost of inventory related to third party software resale. Hosting costs continue to improve as the company executes a multiyear action plan.
• In Q4 FY 2023, monthly recurring revenue (MRR) was $1.33-million compared with $1.41-million in the prior year, a 6-per-cent decrease attributable to declining maintenance and support and subscriptions on sunsetting legacy products as described above. MRR is a non-international financial reporting standard measure, representing average monthly recurring revenues earned in a fiscal quarter.
• Operating expenses, normalized for an asset impairment loss of $19.16-million in third quarter FY 2023, decreased to $18.60-million in FY 2023 compared with $21.72-million in FY 2022. The decrease is primarily attributable to the cost optimization exercise in second quarter FY 2023.
• The Q4 FY 2023 net loss of $1.33-million represents an $830,000 or 38-per-cent improvement compared with a net loss of $2.16-million in Q4 FY 2022. In FY 2023, excluding impairment losses, the net loss decreased by $3.12-million. The improvement in net loss is attributable to the items discussed above.
• The adjusted EBITDA (a non-IFRS measure) loss has decreased by 23 per cent to $2.21-million in FY 2023 compared with $2.86-million in FY 2022. This is attributable to the cost optimization exercise undertaken by management in Q2 FY 2023 as noted above.
• The company's cash and short-term investments balance was $2.22-million at March 31, 2023, compared with $5.02-million at March 31, 2022. Working capital of minus $8.24-million at March 31, 2022, compared with $2.27-million at March 31, 2022, reflects the Vistara loan of $6.39-million being reclassified to current liabilities plus the addition of the $2.23-million Wesley Clover International (WCI) subordinate loan being added to current liabilities. On May 26, 2023, the company announced an extension of the Vistara loan. Under the terms of the extension, Martello will make a series of payments to Vistara, which will pay off the debt in its entirety by Sept. 28, 2023. The company also announced the extension of the WCI subordinate loan to May 24, 2024.

Conference call details

Martello will host a conference call with Mr. Proctor and Mr. Clark at 8 a.m. Eastern Time on Wednesday, June 28, 2023, to discuss the Q4 and FY 2023 financial results.

Canada/United States toll-free:  1-800-319-4610

International toll:  1-604-638-5340

Callers should dial in five to 10 minutes prior to the scheduled start time and ask to join the Martello call. An audio recording of the call will be available on June 28, 2023.

The financial statements, notes, and management's discussion and analysis are available under the company's profile on SEDAR and on Martello's website. The financial statements include the wholly owned subsidiaries of Martello.

Two institutional investment firms provide research coverage of Martello. The company does not endorse the research of third party institutions.

About Martello Technologies Group Inc.

Martello (TSX Venture Exchange: MTLO) is a technology company that provides digital experience monitoring (DEM) solutions to optimize the modern workplace. The company's products provide actionable insight on the performance and user experience of cloud business applications while giving information technology teams and service providers control and visibility of their entire IT infrastructure. Martello's software products include Vantage DX, which provides Microsoft 365 and Microsoft Teams end-user experience monitoring and optimization. Martello is a public company headquartered in Ottawa, Canada, with employees in Europe, North America and the Asia Pacific region.

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