Mr. Jim Clark reports

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

Martello Technologies Group Inc. today released financial results for the three months ended Sept. 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.

"I am pleased to report that the business opportunities for Martello with existing and potential clients are highly motivating for the Martello team, who are all working hard to create success for our shareholders," said Terence Matthews, chairman of Martello. "Martello is strategically positioned amidst several promising growth avenues in a dynamic global market of over 400 million users. Recognizing Microsoft Teams has a pivotal role in employee satisfaction, business continuity and overall enterprise customer experience, Vantage DX is a catalyst for seamless Teams collaboration and communication. Vantage DX continues to emerge as the key solution for Microsoft Operator Connect partners seeking to deliver top-tier Teams services and enhanced quality to enterprise clients. The recent acquisition of Unify by Mitel, doubling Mitel's installed base, creates another avenue for future growth for both Mitel Performance Analytics and Vantage DX. Together with the Martello board of directors, I am confident that interim CEO Jim Clark and his team possess the capabilities to execute the company's strategic vision."

"In my expanded role as interim CEO, my foremost objective is to drive increased sales and profitability through a revitalized focus on operational excellence," said Jim Clark, interim chief executive officer and chief financial officer of Martello. "Today, Vantage DX is trusted by major enterprise clients and key partners, and we've made significant improvements to our sales and demand generation processes to drive our sales pipeline. Our enhanced assessment of the voice of the customer is a primary driver to many of the compelling improvements across the value chain. By optimizing working capital and repurposing capacity, we have strengthened our growth strategy and operational performance. In hand with the entire Martello team, alignment and focus is aimed at driving customer satisfaction and sustainable profitable growth for our shareholders."

• Revenue of $3.98-million represented a 4-per-cent increase compared with fiscal Q2 2023. Vantage DX revenue grew year over year and Mitel revenue remained stable. Sunsetting legacy product revenue declined at a slower pace as increased budget scrutiny delayed software vendor changes for many of these businesses.
• Vantage DX is Martello's key Microsoft modern workplace optimization business. In fiscal Q2 2024 Vantage DX monthly recurring revenue (MRR) grew by 142 per cent compared with fiscal Q2 2023, both from net new clients and conversion of clients from legacy products to Vantage DX. Total Vantage DX revenue in fiscal Q2 2024 was $610,000, compared with $240,000 in fiscal Q2 2023. Martello won large enterprise clients for Vantage DX in the 12 months ending Sept. 30, 2023, including a government department with more than 100,000 users and a former legacy product client in the professional services sector with more than 400,000 users.
• Sunsetting legacy product revenue declined by 13 per cent or $250,000 in fiscal Q2 2024 compared with fiscal Q2 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 a 2-per-cent increase in revenue from this segment in fiscal Q2 2024. The Mitel business represented 44 per cent of total revenues in fiscal Q2 2024 (45 per cent in fiscal Q2 2023).
• Revenue was 98 per cent recurring in fiscal Q2 2024 compared with 99 per cent in fiscal Q2 2023.
• Gross margin as a percentage of revenue was 87 per cent in fiscal Q2 2024, consistent with the comparative period in fiscal 2023. Gross margin included lower software hosting costs year over year, offset by an increase in the cost of third party software resale. Management continues to execute a strategy to reduce hosting costs.
• MRR increased by 3 per cent to $1.31-million in fiscal Q2 2024 compared with $1.27-million in the prior year. The increase is primarily attributable to favourable foreign exchange. Normalized for foreign exchange, MRR in fiscal Q2 2024 declined by 2 per cent year over year. MRR is impacted by the decline in maintenance and support subscriptions for 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 11 per cent to $4.16-million in fiscal Q2 2024, also decreasing 3 per cent sequentially since fiscal Q1 2024. The decrease is attributable to the cost optimization exercise launched in fiscal Q2 2023, which included headcount reductions combined with lower vendor spend.
• The fiscal Q2 2024 loss from operations of $680,000 represented a 49-per-cent improvement compared with $1.34-million in fiscal Q2 2023. The improvement is primarily attributable to the cost optimization exercise initiated in fiscal Q2 2023 as described herein.
• The adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (a non-IFRS (international financial reporting standards) measure) loss improved by 88 per cent to $100,000 in fiscal Q2 2024 compared with $850,000 in fiscal Q2 2023. This is primarily attributable to the cost optimization exercise described herein.
• The company's cash and short-term investments balance was $4.17-million as of Sept. 30, 2023 (compared with $2.23-million at March 31, 2023). Working capital improved as a result of the discharge and refinancing of the Vistara loan, with the extension of the Wesley Clover International Corp. loan to Aug. 28, 2026.

The financial statements, notes, and management 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 monitoring 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 Internet 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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