RE:RE:RE:RE:Investor news
JULY 2021
Investor Newsletter
As the summer and Martello’s second quarter of the 2022 fiscal year kick-off, there is plenty of reason for optimism. While the COVID-19 pandemic and its effects are far from over, increased vaccination levels are allowing most regions of the world to move towards a ‘new normal’ with a return to social and business gatherings and in-person activities. At Martello, we continue the work this quarter to prepare for the launch of Vantage DX, our fully integrated digital experience monitoring (DEM) suite. At the same time, having launched the Martello Partner Program, we are working closely with new and potential partners to grow this indirect sales channel, which we believe has enormous potential.
I recognize that Martello’s investors wish to see our progress and investments reflected in the share price, and I want to reassure you that every Martello employee is focused on doing the work today that will bring revenue and user growth tomorrow. I’m confident that the investments we’re making in developing our indirect sales channel and in product innovation will result in increased revenue and user count in the back half of this fiscal year.
Read on for a recap of the 2021 fiscal year, our latest news and activities, and for perspectives from board member Mike Galvin on Martello’s technology and from Eight Capital Research Analyst Christian Sgro on the latest trends in Canadian business and technology stocks.
Thank you as always for your confidence in Martello, and please reach out to me anytime at jproctor@martellotech.com.
John Proctor, President and CEO
Q1 Closes with Large Enterprise Sales Wins and Renewals
In case you missed the announcement earlier this week, Martello ended Q1 on June 30th having closed key sales deals for over 100,000 new users, and the renewal of more than 540,000 existing users. This included customers who chose to add an iQ subscription to their existing Gizmo deployment.
As we move towards the Vantage DX launch in late Q2, these upsells demonstrate growing demand for integrated Martello solutions. These solutions make IT teams more efficient and productive by providing actionable insight into the entire IT infrastructure supporting Microsoft 365 and Microsoft Teams performance.
READ THE PRESS RELEASE
MARTELLO LAUNCHES PARTNER PROGRAM
Martello’s new Partner Program launched in early June 2021. The program allows managed service providers (MSPs) and value-added resellers (VARs) to bring the benefits of Martello's Microsoft 365 and Microsoft Teams digital experience monitoring platform to small and medium-sized enterprises (SMEs). LDI, a New York-based leader in the supply, sale, and service of digital office technology with more than 7,000 small and medium-sized enterprise customers, has joined the program.
Microsoft partners are crucial providers of Microsoft 365 to SMEs that account for more than 60% of the global workforce. Partners at any stage of cloud maturity, supported by a dedicated Martello partner manager, can easily improve their Microsoft 365 and Microsoft Teams customer offering and develop new revenue streams with Martello digital experience monitoring and optimization. The partner program is expected to increase the number of Microsoft users on Martello's DEM platform through FY22.
"Partnering with Martello Technologies brings us unique new tools that differentiate us from competitors and drive additional services revenue as part of our collaboration and communication offering to clients. Martello's DEM solutions strengthen the world-class service we bring to our clients, by enabling our team and our clients to proactively view, monitor and resolve issues related to Microsoft 365 and Microsoft Teams performance and user experience."
- Robert Handel, Senior Director of LDI Cloud Services
WATCH THE INTERVIEW BY E-CHANNEL NEWS
SPOTLIGHT
Mike Galvin, Martello Board Member on Vantage DX and the State of the Industry
Mike Galvin is a telecommunications industry leader with more than 32 years’ experience at BT PLC, the British multinational telecommunications company.
A telecommunications engineer and specialist in broadband networks, he has been responsible for the design, deployment and management of some of the largest broadband networks in the UK, and joined Martello’s Board of Directors in 2018. Given his technology knowledge, we asked for his perspective on industry trends and Martello’s technology.
How has your experience and background at BT informed your approach in advising the Martello team as a board member?
I was fortunate to be at BT at the start of the Internet age. I always took an interest in datacomms and was at the very forefront of the introduction of the Internet and broadband. This gave me fantastic insight into using technology on a national and international scale. In addition, working with government on the key strategic technologies of the Internet revolution I saw first-hand how strategic communications had become to national success. As Head of BT Research I also gained a unique view of evaluating and introducing new technology.
This is very relevant to Martello, a leader in the next wave of the information revolution. Martello has a great opportunity to underpin commerce, education and public services, all of which will rely on efficient and robust communications. Digital experience monitoring and optimization is a core part of this - and the pandemic experience of working from home and hybrid work environments for many of us has emphasized this. As a Board member I take a particular interest in technology. The innovation in the Martello product set is world class. But it is not just about having superb technology. Introducing this technology to market, usability and ease of deployment are essential to success. My aim is to see the Martello technology developed and introduced in a way that customers get the most out of them. This means ease of use as well as great features.
Martello has been making great strides on product innovation and integration as the Company marches towards the launch of Vantage DX. Why has reaching these milestones been so important for Martello?
Martello started off with a range of products through acquisitions that each contributed to managing the user experience. On their own, they were good - but to be great, ease of use is key. This meant integration of the products into a suite, in which all the components work seamlessly together and deliver an experience which can be seen on one integrated display. The sum of the parts is much greater than the whole, and the Vantage DX design gives customers the ability to review their entire operation and evaluate the digital experience, down to individual users if required. This works across international borders, across network and communication providers and across technology choices.
Vantage DX will enable enterprises and partners to see exactly what their people and their own customers experience. It represents a big step forward in putting our customers in charge of what experience their customers and people see as they work digitally.
The Vantage DX integrated DEM suite is expected to launch in late Q2. Why is this important for Martello, in your view?
Launching this year is key to taking advantage of the growing demand for this solution. Most businesses have had to navigate through remote work and hybrid work environments, using the current generation of remote working products to do this. Work from anywhere is driving a need to manage the quality of the experience, as users now rely on these solutions and the tools to chase down problems today are either difficult to use and understand or are not available. Vantage DX will give these businesses an all-in-one solution which is easy to use and understand. The market needs this type of product now, and for the foreseeable future we are confident that some element of remote or hybrid working will be with us.
As the world moves towards a 'new normal', are you seeing any workplace, technology or business trends that you believe will impact Martello over the next few years?
The changes are happening at an unbelievable pace. The changes brought on by the pandemic have affected all aspects of our lives. It can be said with certainty that many of these changes will stay as we return to the ‘new normal’, but I think it is impossible to predict which ones or to what extent. The pandemic is not over either, and although some aspects are returning to pre-pandemic status there are in my view more twists in this story to play out.
It would be a brave person to predict what the ‘new normal’ will be. The most significant changes for all of us may be in areas such as the relationship between government and individuals, the value and ease of international travel and a re-evaluation of globalisation.
Looking ahead in fiscal 22 and beyond, what are the most exciting opportunities for Martello, in your view?
I think some of the most outstanding potential opportunities for Martello in the future revolve around achieving scale through partnerships with industry leaders or integration with product standards.
The Latest in Canadian Technology with Eight Capital Research Analyst Christian Sgro
We asked Christian Sgro, Research Analyst, Technology at Eight Capital for his view on the latest trends in Canadian business and technology stocks.
The last 18 months have seen a great deal of change in business, technology and workplace trends in response to the global COVID-19 pandemic. As the world shifts towards a 'new normal', what trends are you seeing taking shape?
Many companies will continue to support remote work arrangements post the pandemic, or at least flexible arrangements. We believe communication tools like Teams and Zoom have become fixtures. Absent social distancing protocols, these video conferencing platforms break geographic boundaries, save commute time, and offer convenience from home and office environments.
Are you seeing any industry trends impacting Canadian technology stocks in general?
As interest rates track sideways, we are seeing momentum in growth and Canadian technology names through the summer. Investors continue to reward strong top line performance and bellwethers like Shopify are trading at high multiples, albeit off a little bit from the middle of 2020. Investors are thoughtful about what feels like a gradual shift to value-oriented investing, which will benefit companies with strong and defensible margin profiles.
INVESTOR RELATIONS CORNER
Recap: FY21 Financial Results
The 2021 fiscal year was a transformative one for Martello, in which the Company shifted its focus to the emerging digital experience monitoring DEM market. As the world became increasingly reliant on cloud services such as Microsoft 365 and Microsoft Teams to remain productive while working from home, Martello offered solutions to keep these productivity applications working reliably for users.
Key milestones on this journey amidst a global pandemic included the acquisition and integration of Microsoft 365 DEM provider GSX, as well as debt and equity financings. To focus Martello’s resources on this DEM opportunity and reduce operating losses, Martello also made the strategic decision in FY21 to divest the network performance management (NPM) segment of its business. Since acquiring GSX and the shift to DEM, Martello has focused on R&D and sales initiatives which expand Martello's addressable market to include small and medium sized businesses, and product innovation for today’s ‘work from anywhere’ digital workplace.
Highlights from the FY21 financial results:
• $16.8M FY21 revenue represents a 50% increase year over year
• Revenue in FY21 was 97% recurring
• Gross margins in FY21 over 90%
For full details, read the press release.
Listen to the conference call.
Frequently Asked Questions
Why do Martello’s user counts not always grow at the same rate as revenue?
There are a few factors to consider, including deal timing and how revenues are recognized in a subscription-based recurring revenue business. For example, a 12-month subscription won on the last day of a quarter will add users to Martello’s user count in that quarter, but the revenue will be recognized over the next four quarters.
How does Martello keep customers ‘sticky’ to its products?
While Martello has a customer success team that is responsible for advocating for customers, customer retention requires the effort of all corners of the business, to ensure our customers have the best possible experience when they work with us. Retention is influenced by the many activities we undertake to provide a stellar customer experience: QBRs, training, documentation, technical support, deployment assistance, communication of product news and updates, and more.
It’s important to recognize that although Martello strives to retain every customer, there may be circumstances which impact the customer's renewal decision, such as decommissioning of legacy platforms monitored by our software, a shift to a different productivity or collaboration platform, downsizing or budget cuts/delays.
Is Martello’s executive/board compensation aligned to the company’s performance?
Martello follows industry standard compensation models for its executives and board members, including the awarding of stock options, which vest over a period of three years. Compensation is reviewed on a regular basis by the Board’s compensation committee.
When will Martello announce its Q1 FY22 financial results?
Martello will issue its Q1 FY22 financial results in late August. As always, the date will be communicated in a press release that will also contain call-in details for the conference call with CEO John Proctor and CFO Erin Crowe.
When will this year’s AGM take place and will it be virtual?
The notice of meeting will be forthcoming in July, with the meeting taking place in September as has been our practice. Like last year, due to COVID-19 related uncertainty, this year’s meeting will operate in a hybrid format, with shareholders encouraged to join remotely and all voting conducted by proxy.
ICYMI
Martello News & Content
More than 4 million readers had access to media coverage of Martello’s Partner Program launch, with publications from TechTarget to Channel Futures to Channele2e covering the news. A selection of Martello News and Blogs from Q1:
Channel Futures: Martello Technologies Group Targets MSPs, VARs with New Partner Program
eChannel News Video Interview with Mike Danforth and Robert Handel (LDI)
Blog: Boost Business Productivity by Taking Control of Microsoft Teams Performance
Blog: How Martello Helps Managed Service Providers Deliver Reliable Microsoft 365 Services
Blog: Understanding a Microsoft Service Outage: What it Means & How to Prepare