Martello Technologies is banking on its burgeoning Microsoft sales channel to get it back on track after the Kanata software firm’s revenue growth slowed to a crawl in fiscal 2022 following a major surge earlier in the pandemic.
Martello (TSX-V:MTLO) said late Tuesday it posted sales of $17.5 million for the fiscal year ending March 31, up just four per cent from the previous year’s revenues of $16.8 million.
Meanwhile, the firm continued to rack up losses as it poured money into marketing, sales and R&D in an effort to expand its customer base. Martello booked a net loss of $8.2 million in fiscal 2022, compared with $6.4 million the year before.
Martello, which makes products that help customers detect and troubleshoot problems in their high-speed communications networks, gets its income from two main sources: performance-analytics software aimed at Mitel customers and analytics and network-monitoring platforms for Microsoft 365 and Teams users.
The firm boomed at the dawn of the COVID-19 crisis as the shift to remote work, the rise of streaming services such as Netflix and a host of other factors combined to put more strain on wireless networks, driving up demand for Martello’s services.
Legacy product sales flatline
Martello’s revenues surged 50 per cent in fiscal 2021 compared with the year prior, and the company said its “strategic shift” to network-monitoring software appeared to be paying off.
But that growth stagnated in fiscal 2022 as sales of its legacy products flatlined. Meanwhile, Martello’s stock price – which never benefited from the same kind of pandemic-fuelled bump as other high-profile Ottawa software firms such as Shopify and Kinaxis – went into a free fall, plummeting 80 per cent in the past 12 months.
Martello shares were trading at three cents on the TSX Venture Exchange as of Wednesday afternoon, down a cent from Tuesday’s close and well off their 52-week high of 16 cents.
Still, CEO John Proctor says he believes the future is bright as the company shifts its focus away from its traditional Mitel customers to the growing Microsoft market segment – particularly customers of its flagship Vantage DX troubleshooting software for Microsoft users.
“The end of the 2022 fiscal year marked an inflection point for Martello towards an absolute focus on becoming a Microsoft Modern Workplace optimization leader,” Proctor said in a statement.
“In FY22 we built the product, sales channels and go-to-market strategy to address this market, one which has greater potential than anything Martello has ever done. We are seeing early indicators of momentum around the Vantage DX solution just a few months after launching.”
The Microsoft sales channel accounted for 47 per cent of Martello’s revenues for the 12-month period ending in March, up from 41 per cent in fiscal 2021. Nearly 2.8 million Microsoft users are now on the platform, compared with 2.7 million a year earlier, with more than 200,000 of those users subscribing to Vantage DX – up from about 70,000 in mid-January.
“We are a highly engaged and fast-moving partner within the Microsoft ecosystem, and we are beginning to see results from this focus and drive to maximize the partnership,” Proctor said.
The company had $5 million in cash on hand at the end of March, compared with $8.52 million a year earlier, along with net working capital of $2.27 million, down from $4.5 million in March 2021.
Martello landed $2.5 million from the Federal Economic Development Agency for Southern Ontario earlier this year, fresh capital the company said would go toward expanding its software development team and marketing Vantage DX.