Mr. Terence Matthews reports

MARTELLO REPORTS FINANCIAL RESULTS FOR THE FIRST QUARTER OF THE 2024 FISCAL YEAR

Martello Technologies Group Inc. has released its financial results for the three months ended June 30, 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.

"Almost everyone has experienced the frustration of a Microsoft Teams meeting marred by audio or video issues, or a failure to connect," said Terence Matthews, chairman of Martello. "Senior executives consistently communicate to me that these challenges impact productivity, erode customer experiences and diminish employee satisfaction. With Martello Vantage DX, organizations can harness the full potential of the modern workplace, unburdened by the interruptions stemming from IT infrastructure issues."

"Legacy product revenue declines were a forecasted headwind in Q1 FY 2024. The pro-active measures we've taken to streamline costs and manage debt in FY 2023 will set Martello up for success," said John Proctor, president and chief executive officer of Martello. "We are focused on driving Vantage DX revenue growth and continuing to develop our strong Mitel business. As legacy product revenue sunsets, we expect overall revenue growth will deliver value to shareholders."

"I'm pleased with actions taken this year to optimize spend with a focus on aligning Vantage DX with the significant market share gains of Microsoft Teams," said Jim Clark, chief financial officer of Martello. "Vantage DX continues to deliver value towards quantifiable improvements in business productivity. Our annual operating plan is focused on expanding market penetration and revenue with the help of important partnerships, including Microsoft, Orange Business Services and CGI." Mr. Clark added: "The recent refinancing of the Martello debt provides several benefits. Settling the Vistara debt earlier has provided additional runway to deliver net accretive growth and positive adjusted EBITDA while deferring the cash outlay until Aug. 28, 2026."

Q1 FY (fiscal year) 2024 financial highlights:

• Revenue in Q1 FY 2024 was $4.0-million, representing a 4-per-cent decrease compared with Q1 FY 2023. As Vantage DX revenue grew year over year and Mitel revenue remained stable, sunsetting Legacy product revenue declined by 25 per cent, causing the decline in total revenue.
• Vantage DX is Martello's key modern workplace optimization business. In Q1 FY 2024, Vantage DX MRR grew by 232 per cent compared with Q1 FY 2023, both from net new clients and conversion of clients from legacy products to Vantage DX. Total Vantage DX revenue in Q1 FY 2024 was $510,000, compared with $150,000 in Q1 FY 2023.
• Sunsetting legacy product revenue declined by 25 per cent or $570,000 in Q1 FY 2024, compared with Q1 FY 2023. The continuing decline of Legacy product revenue is proceeding as planned. The company is executing a strategy to convert certain Legacy customers to the Vantage DX platform.
• The Mitel business remains a stable and profitable source of recurring revenue and cash, with Q1 FY 2024 seeing a marginal positive exchange rate impact. The Mitel business represented 45 per cent of total revenues in Q1 FY 2024 (42 per cent in Q1 FY 2023).
• Revenue was 98 per cent recurring in Q1 FY 2024, compared with 99 per cent in Q1 FY 2023.
• Gross margin as a percentage of revenue was 88 per cent in Q1 FY 2024, compared with 89 per cent in Q1 FY 2023. The marginal decrease is attributable to the increased cost of inventory due to higher Mitel hardware sales and an increase in third party software subscription resale in Q1 FY 2024 compared with Q1 FY 2023. This is partially offset by lower hosting costs in Q1 FY 2024 compared with Q1 FY 2023, as the company executes a multiyear action plan to reduce these costs.
• MRR (monthly recurring revenue) was $1.31-million in Q1 FY 2024, compared with $1.38-million in the prior year, a 5-per-cent decrease attributable to declining subscriptions and related maintenance and support on sunsetting Legacy products. MRR is a non-IFRS (international financial reporting standards) measure, representing average monthly recurring revenues earned in a fiscal quarter.
• Operating expenses decreased 15 per cent to $4.29-million in Q1 FY 2024. The decrease is attributable to the cost optimization exercise launched in Q2 FY 2023, which included head count reductions combined with lower vendor spend.
• Q1 FY 2024 loss from operations of $760,000 represented a 42-per-cent improvement compared with $1.31-million in Q1 FY 2023. The improvement is primarily attributable to cost optimization efforts initiated in Q2 FY 2023.
• The adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (a non-IFRS measure) loss improved by 69 per cent to $200,000 in Q1 FY 2024, compared with $650,000 in Q1 FY 2023. This is primarily attributable to the cost optimization described above.
• The company's cash and short-term investments balance totalled $3.73-million as of June 30, 2023 (compared with $2.22-million at March 31, 2023). Working capital will significantly improve with the recent debt refinancing described above.

Conference call details

Martello will host a conference call with Mr. Proctor and Mr. Clark at 8 a.m. Eastern Time on Tuesday, Aug. 22, 2023, to discuss the Q1 FY 2024 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 Aug. 22, 2023, on the Martello website.

The financial statements, notes, and management's discussion and analysis (MD&A) are available under the company's profile on SEDAR and on Martello's website. The financial statements include the wholly owned subsidiaries of Martello. All amounts are reported in Canadian dollars.

About Martello Technologies Group Inc.

Martello 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 IT (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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