Martello Technologies’ revenues fell nine per cent year-over-year in the third quarter of its fiscal 2023 as it works to transfer customers from older-generation legacy products to its new Vantage DX platform.
The Kanata-based firm, which makes wireless network troubleshooting software, reported sales of $4.05 million for the three-month period ending Dec. 31, down from $4.45 million the previous year.
The company posted a net loss of $20.2 million, a dramatic jump from the $2.2-million deficit it recorded in the third quarter of 2022.
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Martello said most of that loss came from a $19.3-million non-cash impairment charge for writing off goodwill related to the “high cost of capital” as well as a “challenged technology sector” that affected the company’s share price and the growth of its Vantage DX business line.
Martello’s share price was unchanged at two and a half cents Wednesday on the TSX Venture Exchange. Its stock is down by more than 50 per cent from its 52-week high of seven cents set last spring.
Martello helps customers detect and fix problems in their high-speed communications networks. The publicly traded firm generates 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.
While Martello started out serving mainly Mitel customers, the Microsoft sales channel has gained ground as the number of Teams users soared during the pandemic.
Over the past year, the firm has been gradually phasing out its legacy products in favour of the Vantage DX platform aimed at Microsoft customers.
Third-quarter sales of Vantage DX rose to $380,000, up from $15,000 a year ago, but those gains failed to make up for an $810,000 decline in revenues from Martello’s sunsetting legacy products.
In a news release on Wednesday, Martello said it “has identified certain legacy customers with potential to migrate to the Vantage DX platform and is executing on a strategy to convert these customers.”
Martello’s monthly recurring revenues fell seven per cent to $1.34 million, a drop the company attributed to declining subscriptions for its legacy products and a decrease in related maintenance and support fees.
The firm said its Mitel business line remains a “stable and profitable” source of recurring revenues, with sales rising to $1.86 million in the quarter from $1.81 million the previous year.
CEO John Proctor said Martello’s new status as a Microsoft Top Tier partner “unlocks significant growth potential” for the Vantage DX platform.
“We are focused on executing on this partnership and further accelerating our channel strategy,” he said in a statement. “I believe we are appropriately resourced today to be successful. As we move towards the next fiscal year, I expect this partnership and other channels to drive growth in Vantage DX MRR.”
Earlier this week, Martello announced that former CEO Bruce Linton was stepping down as co-chair of the firm’s board of directors.
Company directors Jennifer Camelon and Michael Michalyshyn also resigned and will not be replaced, leaving the board with six members.
Board chair Terry Matthews said the downsizing is part of an effort to “more closely align” the board with “the company’s tightened focus on the Microsoft Teams market.”
In a statement, Matthews paid tribute to the outgoing directors and praised Linton for the “critical role” he played in the company’s move to the public markets on the TSX Venture Exchange in 2018.