Martello Reports Fourth Quarter and Fiscal 2019 Financial Results with 78% of $10.4M Annual Revenues Recurring
Martello Reports Fourth Quarter and Fiscal 2019 Financial Results with 78% of $10.4M Annual Revenues Recurring |
[17-July-2019] |
Annual revenues grow more than 103% year over year, while quarterly revenues of $3.4 million represent a 99% increase over the same period of 2018. /NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES./ OTTAWA, July 17, 2019 /CNW/ - Martello Technologies Group Inc., ("Martello" or the "Company") (TSXV: MTLO), a leading provider of technology solutions that deliver clarity and control of complex IT environments deployed in thousands of locations around the world, today released financial results for the fourth quarter and fiscal year ended March 31, 2019.
Q4 and FY2019 Highlights
"Steady and strong revenue growth in the 2019 fiscal year, both organically and through acquisitions has created the foundation to accelerate Martello's business", said John Proctor, President and CEO of Martello. "Having invested significantly in people and systems, Martello is now well positioned to target and acquire accretive assets and drive responsible growth going forward". Business Highlights During the fourth quarter Martello achieved the following milestones:
Subsequent Activities Subsequent to March 31, 2019, Martello achieved the following milestones:
Financial Highlights Note: The information contained in the following tables, including the Remaining balance and Variance calculations, is intended to assist in the year over year comparison and provide additional clarity on the year over year results. Martello reported revenues of $10.4 million for the year ended March 31, 2019, and $3.4 million in the three months ended March 31, 2019. This represented an increase of 103% and 99% respectively over the same period in the prior year, and can be attributed to both organic growth and the acquisition of Savision in November 2018. Savision contributed $1.9 million in revenue in the 2019 fiscal year.
Gross margin as a percentage of revenue remained strong at 93% for fiscal 2019 and 92% for the three months ended March 31, 2019. This is only a slight decrease from 94.3% in fiscal 2018 and 93.5% for the three months ended March 31, 2018, and is due to the acquisitions of Savision and Elfiq, which brought the overall margin down slightly. Sales and Gross Margin Q4 2019
Revenue grew 30% between Q4 FY2019 and Q4 2018, excluding Savision. This reflects organic growth of 33% from the Mitel channel, due to an increase in recurring revenue from the number of users for Mitel's premium software assurance program and an increase in fees from Mitel resulting from the amendment to the Company's agreement with Mitel. In addition there was organic growth of 26% from SD-WAN and link-balancing sales. The gross margin at 92% is comparable to the same period in FY18. FY 2019
For the twelve months ended March 31, 2019 and 2018, the Company earned revenue of $10.4 million and $5.1 million, respectively and had gross margins of $9.7 million (93.2%) and $4.8 million (94.3%) respectively. Recurring revenue, which was 78% of total revenues in the fourth quarter of fiscal 2019 and for the year ending March 31, 2019, includes fees earned on a monthly per-user basis, fees earned monthly from device usage and revenue from subscription to software licenses, all from performance analytics for unified communications ("UC"). In addition, recurring revenue includes maintenance programs on hardware and software link balancing and bandwidth management solutions; subscription sales, maintenance and support on the licenses for visualization of IT systems management data; and support for UC enterprise management software. Excluding Savision and Elfiq, the 33% organic revenue growth is due primarily to an increase in the number of users for Mitel's premium software assurance program and growth in the fees per user received from Mitel in Q4 resulting from the amendment to the agreement with Mitel. The gross margin at 93.2% is comparable to the same period last year (94.9%). Cost of goods sold represents the costs of hardware, installation and delivery, sales commissions and web services. Customer Growth Sales included subscription-based software sales and renewals, perpetual software and hardware sales, and the sales of maintenance and support contracts. Martello generates revenue from both new business and the renewal of existing software and maintenance subscriptions. In the fourth quarter of fiscal 2019, the Company earned business from customers including Sonepar Canada, the United States Postal Service, and the Dublin Airport Authority. Martello has been in business since 2009, with subsidiaries in business since 2003. In this time, the Company has developed longstanding relationships with customers and partners that have continued to renew and grow their Martello solutions over time. These include Frost Bank (8 years), Leiden University Medical Center (13 years), Mandarin Oriental Hotel Group (11 years), 4Sight Communications (6 years) and KPMG NL (12 years). Martello saw global sales growth in the fiscal year ended March 31, 2019, compared with the fiscal year ended March 31, 2018. Significant growth was seen in Europe (198% increase), Asia (301% increase), Latin America (345%) and the United States (89%). Regional growth has been driven by the acquisition of Savision, which is based in Amsterdam, expansion of the Mitel channel, and the growth of Martello's sales and marketing team.
Expenses In fiscal 2019 the Company made investments in people, research and development and sales and marketing activities, and foundational systems which will enable the company to scale. In doing so, Martello has established a core capacity for future organic growth and acquisition activity.
For the twelve months ended March 31, 2019 and 2018, operating expenses totaled $13.9 million and $5.7 million, respectively. Excluding Elfiq and Savision, expenses increased by $3.8 million. As Savision was acquired on November 1, 2018 and Elfiq was acquired on December 15, 2017, the following year over year analysis excludes Savision and Elfiq. While sales increased significantly in both the three and twelve months ended March 31, 2019, there were also increased expenses due to a variety of factors, including investment in sales and marketing headcount and activities, increased acquisition costs, the complexity of reporting requirements, and increased share-based compensation. Research and development cost increased by $259,115 due to new headcount added during the year in development, innovation and technical support, higher share-based compensation costs (non-cash), general salary increases, and an investment in additional development tools. The increase in sales and marketing expenses of $492,841 was due in large part to a focus on expanding the Company's brand awareness and communications and increased presence at industry events. The Company has invested in a new website, increased public relations activity, and conference and trade show sponsorship and attendance. Compensation costs also increased year over year due to growth in the team aligned with the above strategy, new sales resources, general salary increases and non-cash stock-based compensation expense. General and administrative expenses include salaries for finance, human resources and executive staff, as well as general corporate expenditures including consulting fees, legal and professional fees, insurance and office rent. General and administrative expenses increased by $1.8 million in FY19. This was due to significant investments to enable the company to scale and establish its platform for future growth. Director fees and professional fees for accounting, audit, tax and legal increased due to the additional complexity associated with the reverse acquisition transaction and public company reporting. Costs in the current year also include investment in research and advisory services and in new systems and implementation costs, which were not incurred in the prior year. Salaries and share-based compensation expense increased, relating to additional executive staff, the accelerated vesting of certain stock options as a result of the RTO, and an expanded finance team required for both internal and external reporting needs. Amortization relates to the amortization of intangible assets identified upon the acquisition of Elfiq and Savision. Given the timing of the acquisitions, costs in FY18 related only to the Elfiq acquisition whereas FY19 includes both Elfiq and Savision. Acquisition related costs relate to the integration of Elfiq and the acquisition of Savision, including a success fee paid to the M&A advisor for the Savision transaction. Prior year costs related to advisory, due diligence, legal costs and a success fee for the acquisition of Elfiq. Loss from Operations The loss from operations for the three months ended March 31, 2019 and 2018 was $1.3 million and $613,395 respectively, an increase of $698,177. For the twelve months ended March 31, 2019 and 2018, the loss from operations was $4.3 million and $927,678, respectively, an increase of $3.3 million. Excluding the impact of Savision, the loss from operations increased $633,017 year over year for the three-month period ended March 31, 2019. Excluding the impact of Savision and Elfiq, the loss from operations increased $2.3 million year over year for the twelve-month period ended March 31, 2019. EBITDA and Adjusted EBITDA Summary (Non-IFRS financial measures) The Company's "EBITDA" and "Adjusted EBITDA" are non-IFRS financial measures used by management that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. EBITDA is calculated as net loss before interest income, interest expense, accretion of long-term debt, income tax recovery, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA excluding share-based compensation expense, reverse acquisition costs, acquisition-related costs and foreign exchange gain/loss. Management believes Adjusted EBITDA is a useful financial metric to assess its operating performance on an adjusted basis as described above. Adjusted EBITDA in the three months ended March 31, 2019 was a loss of $827,238, compared to a loss of $205,650 in the three months ended March 31, 2018. Adjusted EBITDA in the twelve months ended March 31, 2019 was a loss of $1,689,272, compared to a loss of $22,120 in the twelve months ended March 31, 2018.
Share Capital The Company had 191,237,568 shares issued and outstanding as of March 31, 2019. The number of common shares has been retrospectively adjusted to reflect the share exchange in connection with the reverse takeover transaction of 3.2 shares issued in the Company for each share of Martello Corp. In Q4 2019, the following transactions in the share capital of Martello occurred:
Cashflow and Capital Resources Summary At March 31, 2019, the Company had $6.65M of cash and restricted cash on hand, and $4.9M of net working capital to fund operations and growth.
For the foreseeable future, the Company expects to continue financing its operations through raising equity capital and long-term debt to strengthen its financial position and to provide sufficient cash reserves for growth and development of the business. In addition, the Company is focused on generating cashflow from operations while maintaining strong investment in research and development to maintain current revenue and drive increased growth. In June 2018, the Company closed a private placement of $7,585,311, which is being used to fund general working capital, possible future acquisitions and to support the reverse takeover transaction. In September 2018, the Company entered into an agreement with NRC-IRAP to fund up to $2,000,000 of development costs over three years for certain projects including the hiring of additional staff. On November 1, 2018, in connection with the Savision acquisition, the company closed the RBC Loan and drew $3,000,000 on the term loan. The RBC Loan also includes a $1,000,000 revolving facility which is undrawn as of the date of this MD&A. The Company believes that cashflow from operations, the receipt of funds from the private placement, proceeds from the RBC Loan and available cash and working capital will be sufficient to fund organic growth over the next year. Outlook Martello intends to continue executing on its strategy of organic growth and growth through acquisition activity. The Company has enough funding for operations for the foreseeable future. The Company continues to diversify its customer base with the acquisition of Savision in Q32019. This reduces the proportion of Martello's revenue from the Mitel channel, even as revenues continue to increase from this channel. In addition, the Company has established a strong platform for future acquisitions with investments to expand the research and development team, enhance sales and marketing activities, and implement new systems to drive efficiencies. As a result, future acquisitions will integrate more effectively, enhancing the Company's product lines and driving additional revenue and EBITDA. The financial statements and notes 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. Conference Call Details Martello will host a conference call and audio webcast with John Proctor, President & CEO and Erin Crowe, CFO at 10:00 AM Eastern Time on July 17, 2019. 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 17, 2019. About Martello Technologies Group Martello Technologies Group Inc. (TSXV: MTLO) is a technology company that provides clarity and control of complex IT infrastructures. The company develops products and solutions that monitor, manage and optimize 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 SD-WAN technology, network performance management 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 The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. Additionally, the Company undertakes no obligation to comment on the expectations of, or statements made, by third parties in respect of the matters discussed above.
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Company Codes: OTC-PINK:DRKOF, TorontoVE:MTLO |
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