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Cantech Investment Conference Interview with Martello Technologies Group
0 Comments| February 15, 2019

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The recent Cantech conference in Toronto had two major themes – Internet of Things (IoT), and AI/Machine learning. One of the largest companies there was Martello Technologies Group (V.MTLO, Forum) – a new listing on the TSX Venture that has recently expanded operations globally.

Stockhouse’s VP of Sales and Marketing, Justin Meiklem, sat down with company CEO John Proctor to discuss the IoT space and how Martello Technologies Group is positioning itself for the future.

Justin Meiklem: Hi John, thank you for joining me. Please summarize what Martello is about?

John Proctor: Absolutely! The company is about solving the complex network environment. Most enterprises are growing more and more complex, and most IT Directors or CIOs want to understand their environment, visualize what is going on, identify any complex issues, and solve them, and that’s where we fit, that’s the business problem that we solve daily.

Every time you add an office, or an application or system, your network becomes that much more complex. You can use us to visualize anything important, we are product neutral – so whether you brought SolarWinds in, CA, Splunk- we have a dashboard you can bring all that into and see just the one thing you are doing. One way we are unique, is that we can bring your phone system in as well. It used to be that phone systems and IT were separate, and never talked, but now the phones are also part of the overall network. Emails, database, phone system, the cloud, you need it all to work, we bring all of that together.

JM: So... what Hootsuite is to Social Media, Martello is to Office Solutions?

John Proctor: Sure, in the Enterprise IT environment. If you look at the people who use us- like the United Nations – but it’s also small banking and financial institutions, and large businesses like VW.

JM: Who is your ideal customer?

John Proctor: Our customers can range from those huge operations like VW down to relatively small 200-person companies. This is one of the beauties of Martello – everybody needs it. If you are an investor who looks to invest in what is needed all the time, then you invest in companies like TD Bank or Saputo, because they supply things like banking and cheese – that are always going to be needed. That is us, because environments are becoming more complex. Phones used to be copper wires in a box on the wall, now they are part of the network. Because your data isn’t local anymore, it’s on the Cloud, you need us. Now your network needs to work, which makes you need us more. If you look at investor buzzwords like AI, Big Data, Blockchain etc., the answer is that we enable all of it. As these trends mature, complexity will increase, and we will always be the foundation to make it work.

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John Proctor, President and CEO of Martello Technologies

JM: Interesting. As new investors are coming up to you asking about Martello, how would you categorize the stage that Martello is at right now?

John Proctor: I would say we are solidified – we are 4 months into being public, and just finishing the integration of another acquisition. We are building the menu for who we should be talking to next, our organic growth is solid, we are doing 80% recurring revenue, our margins have been healthy at over 90% – so, great numbers, and from that base you can build. We are building a baseline to grow and to continue to scale. Part of that was bringing in a fabulous CFO. You need all the team members and structure to be able to scale.

JM: How many employees does Martello have?

John Proctor: Just under 100.

JM: And they are all in Ottawa?

John Proctor: No, we have physical offices in Ottawa, Montreal, Paris, and Amsterdam.

JM: For sales people?

John Proctor: Yes. Our latest acquisition, Savision was headquartered in Amsterdam with R+D in Ottawa. Our R+D is now mostly together in Ottawa and Montreal, but now we have a whole sales team in Europe, which we’ve never had before.

We are 3 months into the Savision acquisition, and the CEO stayed on, and is now our Chief Revenue Officer. When you ask how this company is different, there’s an example, when the former CEO wants to stay and drive sales, because she sees exactly where this company is headed, that tells you a lot. Just last week we closed a very large customer in Eastern Europe, which Martello would have found difficult before, when we just didn’t have this large presence there.

JM: So, VW is a major commercial customer. What would be another one?

John Proctor: Another large North American customer would be Marriott Hotel. They are more of a franchise model, but we work with some of their hotels.

JM: I’d never heard of Martello before this conference, and I was surprised a Canadian technology company of this size slipped past me – was there a name change?

John Proctor: Best secret ever! No, we’ve always been Martello. It’s a Canadian name. If you go to Kingston and visit Fort Henry, you will see the two Martello towers nearby. These are the old defensive towers that also gave visibility, away from the main fort – that’s where the name comes from, to have the same high-level visibility to defend the system.

JM: Do you have institutional investors, yet?

John Proctor: When we did our private placement in 2018, we were looking for $4-6M, were offered about $9M, and we dialed that back to $7.5M. We had institutional interest and family office, and of course some retail, as well. Martello has 28% insider ownership – 21% of that is Wesley Clover, Terry Matthews, still holding.

JM: That’s impressive, in what was a fairly soft technology market…

John Proctor: Yes. People ask me if Martello is speculative, and the answer is we’re not, we’ve grown past that. We are definitely on a growth path. Think about what we did in 2018 – a private placement, 2 acquisitions, and we went public, all in one year. We were warned that it would be too much, and we said, “watch us”, and then did it. That shows that we are good at executing.

JM: What is the biggest change now that you are a public company?

John Proctor: Being public is a lot of work. To new CEOs, I would say be ready to dig in, and it takes a lot of mental and emotional fortitude to drive through it. I think the biggest change is the degree of scrutiny, but you must recognize that you have this triumvirate now to keep happy- shareholders, employees, and clients. Ones of your roles is to please those 3 sectors as best you can, simultaneously. I reinforce with the management team that when we make decisions, we have to look through the lens at those 3 pieces and make sure we get it right. If all 3 of those groups think you are getting it right, you will grow.

JM: Do you like being at shows like this?

John Proctor: It’s good to meet investors and see who is out there to partner with. To some extent, it’s also the cost of being public – shareholders expect us to be out there, building the brand, meeting with investors.

JM: Speaking to an investor looking at the IoT space, what should they look out for?

John Proctor: Watch the hype. IoT is like many things – everyone mentions smart cities, the connected fridge. Make sure you understand what problem these guys are actually trying to solve. If it’s something really complicated like a smart city, and the company you are looking at is going to make the parking more efficient, say with an app that is going to show you that there are 12 spaces in this parking lot, and 6 spots available in that lot, it solves a problem because I am not driving around, looking for parking. So, an investor should look at it through that lens – is this company solving a real problem or is it just doing something cool? The second thing is – do they understand that this is a long play -I will use 5 G as an example – a lot of the IoT stuff will be enabled by 5G. At the moment, there are 23,000 cell towers in Canada, but for 5G to work, we need 230,000.

So right now, there is a scale issue here – but companies that are working in the space, they understand that, because they are looking at a long-term play. We are doing something with Blackberry QNX, at the moment, in the autonomous vehicle space, and what we are working on is how that car is going to connect to the network. Think about it – if you are sitting in an autonomous vehicle, are you happy if it has one connection to that closest tower? No – that’s not safe or secure, as we’ve all been on the train or in the car and our phones lose their signal – so you are going to need multiple connections, and probably more than one carrier, just in case. Multiple cell towers, simultaneous connections with multiple internet providers – but as far as the car is concerned, it just needs an internet connection. Simple, and it just needs to work – that’s us. We’re solving that problem – multiple bonding and connecting that car out, and its not easy. We are writing algorithms for ourselves, that are going to be taking our core technology and adapting it to the IoT space.

So that’s a good indication, if you have something proven market ready, and it is solving a real problem that has been identified, then an investment could be justified. That is key if you are trying to decide if an opportunity will work.

JM: Great advice, John. Last question, last year was a big year for Martello, what can an investor look forward to this year?

John Proctor: You will see Q3 results out shortly – a lot of people will be interested in that.

JM: Are you looking forward to that?

John Proctor: Yes, I am looking forward to it. We are also making the next menu for further acquisitions, so there may be some action there. We also just announced a stronger Mitel relationship, and as they grow, we will grow - all these things are very exciting. Now that we are just under 100 people, it gives us the opportunity to scale, and the ability to prosecute some things that we wouldn’t have been able to at a smaller size. That includes from a development perspective as we progress towards having more good news from the new things we are developing, plus some more growth through acquisition.

JM: What type of companies do you look to acquire?

John Proctor: Complementary. We are looking for companies that fit into that vision of solving network IT problems. We know what our vision is, and if they fit into that, we are interested in having that discussion. What is nice is that we are seeing small Canadian companies now coming to us, saying “We’ve been around for a few years, have some good clients, some cool tech, but we just can’t break through that ceiling”. And when they fit, it’s a great thing to be able to say, “Come onboard, join us, and we will be bigger and better together.” With companies like that, we want to find those synergies and integrate, knowing that they’ve put their sweat equity, heart and soul into those products. We are saying “This thing that you have put all this effort into, it’s going to live, come with us and let’s do this together.” They get to know that their product is going to live on – we’ve even met people here at the conference, who all know that this market is so big, its huge. I have a great desire to partner with companies who say, “Can we do something together”. To be part of Canadian companies getting together, that’s a great place to be.

JM: I just saw Bruce Linton speak and he mentioned Martello. What is his connection?

John Proctor: He is co-chair of the board, guiding us through markets and capital. He is still fully engaged, obviously board meetings etc., but we have a call with him every week, talking about which investors are we talking to, which institution or capital market fund should we be talking to? We really value that – he knows his stuff. We are 4 months old as a public company and having someone like that to guide you is absolutely fabulous.

JM: Thank you for your time, John, and continued success in 2019!

John Proctor: You are very welcome, Justin.

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