Martello Technologies Group Inc

XTSX:MTLO

Earnings Call Transcript 2021-Q1

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Martello Technologies Group First Quarter Fiscal Year 2021 Investor Conference Call. Today's call will provide information and commentary on financial results for the first quarter of the 2021 fiscal year or the 3 months ended June 30, 2020. We will hear from John Proctor, President and CEO of Martello; and Erin Crowe, Martello's Chief Financial Officer. Following these remarks, John and Erin will take questions from analysts. If you have questions following the call, you can reach Martello at [e-mail], here are a couple of housekeeping notices. [Operator Instructions] This call is being recorded, and we expect that the recording will be available on Martello's website today. We remind you that today's remarks will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please see the reader advisory at the bottom of Martello's news release, which is on their website and on SEDAR. The company's actual performance could differ materially from these statements.We will begin with a review of the financial results with Martello's CFO, Erin Crowe. Erin?

[Erin Crowe, Chief Financial Officer]

Thank you. Martello's mission is to be the dominant global provider of digital experience monitoring, or DEM, solutions, providing our customers with the industry's clearest picture of the user experience for cloud services, such as video conferencing. Martello has thousands of customers in more than 175 countries around the world.In Q1 fiscal 2021, Martello entered the rapidly growing Microsoft 365 DEM market with the acquisition of GSX. I would remind everyone that as GSX was acquired on May 29, 2020, today's results include just 1 month of GSX financial results. Q1 was an active and transformative quarter for Martello, in which we managed both the challenges and opportunities brought about by COVID-19. We strengthened our balance sheet with a $6.9 million bought deal, acquired GSX to enter the Microsoft 365 market and closed new financing arrangements. Subsequent to Q1 fiscal '21, we divested the majority of the assets and liabilities of the SD-WAN business to focus resources on our growing DEM opportunity.Now I will turn to the details of our financial results this quarter. In Q1 fiscal '21, I'm pleased to report that monthly recurring revenue increased by 59% year-over-year to reach $1.46 million compared to $920,000 in the same quarter during the prior year, with 98% of revenues recurring and gross margins of over 94%. We believe that our growth rates, gross margins and percentage of recurring revenue metrics place us among the leaders that deliver software-as-a-service solutions within any sector. Our Q1 fiscal '21 revenues demonstrate growing industry demand for digital workforce solutions related to a global shift to remote work. Although initial spending was cautious in April and May as CIOs dealt with budget uncertainty and other challenges related to COVID-19, in June, we began to see new incremental deals. This was the result of demand for remote cloud collaboration capabilities to keep employees productive from any location in the world.I'm pleased to report that the company achieved positive adjusted EBITDA of $200,000 in Q1 of fiscal '21 compared to a loss of $498,000 in the same period of fiscal '20. Adjusted EBITDA is a non-IFRS financial measure, which assesses operating performance before the impact of onetime costs associated with acquisition activity, impairment losses and other noncash costs as well as discontinued operations beginning in Q1 FY '21. This is the first time in our history as a public company that we've posted positive adjusted EBITDA, and it reflects our prudent response to COVID-19-related uncertainty in the quarter. To manage risk, we temporarily decreased headcount, salaries, travel and other expenses.As we exploit Martello's fast-growing market opportunity in fiscal '21, we will review these measures and balance profitability with growth. We'll focus on making key investments to drive high-margin, high-quality recurring revenue growth, which we are convinced will maximize shareholder value. Total revenue was $3.3 million in Q1 of fiscal '21 compared to $2.76 million in the same period of fiscal '20, representing a 21% increase year-over-year. Results from the SD-WAN division are presented as discontinued operations in Q1 fiscal '21 and Q1 fiscal '20 statements of profit and loss and are, therefore, reflected separately in the results for these quarters.Operating expenses were $4.2 million in the quarter ended June 30, 2020, as compared to $3.2 million in the quarter ended June 30, 2019. The increase of $1 million related to onetime acquisition costs of $800,000, amortization of GSX intangibles of $130,000 and $550,000 in GSX operating expenses. Excluding these items, operating expenses decreased by $470,000 compared to the same quarter last year. The decrease in expenses is related to COVID-19 reductions in travel and marketing activities as well as temporary reductions in base salaries and reduced headcount.The recurring portion of total revenue was 98% in Q1 of fiscal '21 compared to 93% in the comparative period of fiscal '20. Revenue from sales of UC Performance Analytics software to the Mitel channel in the 3 months ended June 30, 2020, increased by 6% to $1.9 million compared to $1.8 million reported for the same period in fiscal '20. Gross margins remained strong and consistent at 94.2% in Q1 fiscal '20 (sic) [ '21 ] compared to 93.8% in Q1 of fiscal '20. The loss from operations was $1.1 million in Q1 of fiscal '21 compared to a loss of $600,000 in Q1 of fiscal '20. Operating losses, including restructuring costs associated with discontinued operations of the Elfiq SD-WAN division, were $400,000, and onetime transactional costs associated with the acquisition of GSX were $800,000.The company's cash and short-term investments balance was $6.7 million at June 30, 2020, compared to $5.9 million at March 31, 2020. As mentioned, in Q1 of fiscal '21, Martello raised $6.9 million in a bought deal offering, which funded a portion of the purchase price of GSX with the remainder used for working capital and general corporate purposes. In addition, Martello completed 2 financing arrangements: a term loan financing with Vistara Capital Partners for USD 8 million, which funded a portion of the purchase price of GSX, and an MRR-based revolving facility of up to $7.5 million with National Bank of Canada, which remains undrawn today. The company is confident, subject to risk factors associated with the ongoing COVID-19 crisis, that it retains sufficient available cash and working capital to fund organic growth plans going forward.I'll now hand it over to John Proctor for his perspective on Martello's results and outlook. John?

[John Proctor, President, CEO & Director]

Thanks, Erin. Good morning, everyone, and thank you for joining us today. I'll talk today about Martello's strategy and outlook, and I'd like to begin by highlighting our exceptional high-margin monthly recurring revenue growth this quarter. I'm very pleased that we're able to continue to drive revenue growth and improve the quality of those revenues as demonstrated by the industry-leading MRR.I believe Martello has a solid market opportunity going forward as COVID-19 accelerates the move to cloud for businesses around the world. Q1 of fiscal '21 was an active and transformative quarter, as we acquired GSX and strengthened our balance sheet. We began the quarter with COVID-19 spending -- with spending caution CIOs in April and May and ended the quarter with new incremental DEM deals in June as demand for remote cloud collaboration capability increased. We fully expect this demand to not only continue but grow.As the global workforce shifted to working remotely as a result of the COVID-19 pandemic, businesses have been faced with an urgent need to provide cloud-based tools to their employees. With 200 million monthly active users, Microsoft 365 is the leading cloud productivity suite. The Microsoft 365 video conferencing application, Microsoft Teams, experienced a rapid 70% growth in users as employees the world over relied heavily on it to stay connected and productive. CIOs and IT teams are now faced with ensuring performance and user experience for applications that reside in the cloud and are distributed across multiple networks the IT department does not control. This has created an urgent need to proactively monitor and manage the user experience for these cloud applications.Martello's digital experience monitoring solutions empower this IT team with the insight to proactively identify when and where problems will happen in the cloud and their impact on user experience. The GSX Gizmo solution, in particular, provides the industry's deepest insight into Microsoft 365 user experience including Microsoft Teams. As you might expect, the significant growth in Microsoft 365 usage and the 70% growth in Teams has had and will continue to have a positive impact on Martello's business. As customers migrated Microsoft 365 solutions to the cloud from on-premise to support remote work initiatives, we saw new incremental deals as a result.For example, GSX Gizmo displaced a key competitor in Q1 of fiscal 2021 to win a 6-figure enterprise deal with one of the world's most recognizable Fortune 50 (sic) [ 500 ] brands, as they migrated their Microsoft productivity tools from on-premise to cloud in an effort to support remote workers. We were also pleased to see Gartner recognize this growing market opportunity recently. In 3 reports, GSX is recognized as a key DEM vendor. And each of these reports highlights the growing demand in the market for DEM solutions, particularly for Microsoft 365. Gartner forecasts that by 2024, 50% of all enterprises that use Microsoft 365 will switch to a dedicated third-party solution for monitoring the Microsoft 365 employee experience, up from less than 10% in 2020.Next, I'd like to touch on our progress towards integrating GSX. Integration is a critical success factor for the acquisition of GSX and is a complex process. Martello has an integration team in place, driving the core initiatives and investments needed to be successful, particularly in product development and sales. I am pleased to report that the team's work is well underway and progressing as expected. While executing core integration objectives, we are also guided by a mandate to maintain and grow existing monthly recurring revenue streams.I'd like to close with my perspective on Martello's outlook. I'm very pleased with the strategic decisions we've made over the last 6 months have resulted in significant MRR growth and for the first time positive adjusted EBITDA this quarter. With significant market opportunity in front of us, we will balance profitability with making key investments that will continue to drive high-margin, high-quality revenue growth. We believe this approach will maximize future shareholder value. Sales activity in fiscal '21 will focus on driving monthly recurring revenue through large direct and indirect deals with global systems integrators and managed service providers. We also have cross-selling programs underway for iQ and Gizmo in the Microsoft ecosystem. Product development initiatives are designed to create stickiness by driving incremental value for customers of Martello's DEM products and to expand the addressable market for iQ and Gizmo with the development of cloud-based multi-tenancy for these products. Many of you have told me that you believe our stock is undervalued, and I share that viewpoint. Our revenue growth rate, percentage of recurring revenue and gross margin metrics lands us amongst the very elite software-as-a-service providers within any sector. We are emerging as a market leader in a fast-growing and increasingly urgent market, and we have the technology stack and team that we need to drive value for customers and partners. Combined, these factors should be better recognized in the current and future valuations of our stock. And I can assure you that our Board and management team will work tirelessly to correct this undervaluation.I'd like to thank you for joining us today and wish continued good health to all of you and your families. Erin and I are now here to answer your questions. And operator, would you please facilitate the Q&A part of this call?

[Operator]

[Operator Instructions] Our first question comes from Kevin Krishnaratne of Eight Capital.

[Adhir Kadve, Research Analyst]

It's Adhir actually on for Kevin. I just wanted to ask 1 -- a couple of questions on the Mitel channel growth. I mean subscription revenue was flat from Q1 to Q2. And I just wanted to dive a little bit more on here. Any underlying trends you'd like to -- or -- that you see playing out over the next quarter and that you'd like to call out?

[John Proctor, President, CEO & Director]

So one of the key things we've done is we've integrated ourselves with the new -- Mitel's new key offering, which is Mitel Flex. And I mean we talked about attachment rates before. This is a 100% attachment rate, but it's a brand-new product. It's been launched in Europe initially. We're fully attached there. So we will see some growth coming from that. But I think Mitel, like everybody else, has been adjusting April and May. Our conversation with those guys were sort of -- they weren't necessarily selling new systems. They were spending a lot of time helping people adjust. They did sell a lot of remote access licenses more than they've done in previous -- many more than they've done in previous years in the last few months. So they've certainly accelerated transitioning some of their capabilities to that home environment. So I think now then we'll see that adjustment as people recognize you need these pieces. We've mentioned before a number of big, large sort of industry clients. Those are still ongoing.I mean when you look at sort of cloud-based capabilities and on-premise, 65% of the world's enterprise telephony is still on-premise. And Mitel is one of the biggest players there. So they're adjusting. So I think we'll still see continued incremental growth in the Mitel piece, but they will see continued competition from their competitors. And as we've mentioned before, we've seen one of their competitors, Cisco, acquire one of our competitors, ThousandEyes. So again, we are in very strong conversations with Mitel of how we can support them with DEM. And then particularly with the Mitel dealership network. The Mitel dealership -- those guys offer both Office 365 and Mitel as a service. And being able to bring that into 1 seamless picture for them, so they can truly understand what's happening with their clients from both a Microsoft and a Mitel perspective is enormous value to them. And we've already got 3 partners lined up to be the first clients of that collaboration. So I think we'll see continued positive growth there as Mitel adjusts to the new environment.

[Adhir Kadve, Research Analyst]

Okay. Great. That's very helpful. So just in terms of GSX, I understand completely that only 1 month of contribution here, but a couple of months under the Martello umbrella. Anything you'd like -- anything that you're seeing in this business? Any specific trends you'd like to call out just in terms of pipeline or what type of types of customers you are attracting?

[John Proctor, President, CEO & Director]

Yes. So first off is pipeline is fabulous. Yes. We're very positive on that. We've mentioned we just landed a Fortune 50 (sic) [ 500 ] company, for the same reason is when you buy Microsoft 365, Microsoft can tell you if it's working in their data center or not. They can't tell you if it's working at your house. We can. And if you imagine this new workforce going forward of work anytime, anyplace, anywhere, people want to be able to pick up their laptops, tablets, whatever it is and work, whether it's with minimal other people in an office or from home or from cottage or wherever. And we can tell you what that user experience is. So I think this is where the CIOs are now really starting to adjust their mindset into. This is their new reality. And we had a call with a -- one of the big consulting firm CIOs who delivered -- and we used the scenario saying -- and you've got this sort of, we'll call them the entitled executive who says, why doesn't my Teams work for when I'm at home.And without our tool set, it's really hard for his IT team to be able to troubleshoot that, to be able to say whose problem it is. And quite often, people -- we call it the logo blame game. People say, well, it's Microsoft's fault, right? It's Microsoft Teams they have, and it doesn't work, so it's Microsoft's fault. And it becomes this logo blame game. And in reality, it's not. Microsoft's data center is working perfectly fine, but your connectivity to it -- you're routing could be wrong. Your home network could be completely taken over by family -- other family members or your ISPs having a problem. And unless you can truly diagnose that path and work out where the problem is, the IT team is kind of shooting in the dark to try and do troubleshooting. So this is where we see that real growth path in demand as the IT teams adjust to that, again completely distributed workforce. At the same time, the IT team sitting all together in a network operation center, they're all distributed as well. So making sure they've got the tools that they can access from home -- their own homes is also part of the solution.

[Adhir Kadve, Research Analyst]

Okay. Great. And then just kind of on the same -- just staying on GSX. How about the -- how are you thinking about the cross-selling opportunity between the different directions, like -- sorry, divisions, like potentially selling the GSX into the Mitel base?

[John Proctor, President, CEO & Director]

Yes. So I mean, well, the challenge we have -- and I mentioned the integration is not getting distracted. We have a lot of pipeline at the moment, but there's also significant cross-sell opportunity. So we're being slightly measured on this because, again, any sales team, who are truly coin-operated, will want to sell as many things as they can. But you can't do that and distract them on the current big opportunities they have in front of them. So we're really focused on the Mitel channel. As I mentioned, these folks who sell Mitel as a service and Office 365 as a service, they -- we already have relationships. We already know the clients. We already have data on their networks, for example, because of MPA. We already know what their networks look like, so we can explain to them why this will help. So that's going to be key. But then really also with iQ being able to bring in sort of this into 1 central picture becomes key. So we're seeing some of those cross-sells already where clients either have iQ and they want GSX. But already also the GSX sales team is very -- they're a very strong crew, and they're already, particularly in Europe, seeing that cross-sell opportunity with where they've already got GSX and they've got relationship with clients and bringing iQ in as a tool set to enable what's going on. And particularly with iQ's capability with Azure, its ability to measure Azure instances, you're really seeing this collaboration in that Microsoft ecosystem.

[Adhir Kadve, Research Analyst]

That's helpful. And just 1 last one for me, and then I'll pass the line. Just given that the initial effects of COVID have now kind of passed, how should we think about OpEx from a modeling perspective moving forward?

[Erin Crowe, Chief Financial Officer]

Yes. So I think we are continuing to look at our OpEx and some of the temporary measures that we have implemented in context of COVID. And as you said, the fact that I think some of that initial risk has passed. So we're kind of balancing the temporary measures and when do we sort of move away from those temporary measures and also looking at some of the investments that we need to make to accelerate our opportunities that we have in front of us right now. So from a time line perspective, we don't have a specific date or a period right now where we expect to see that OpEx sort of come back in line with historical or when some of those temporary measures will be removed. But we are looking at it very carefully in context of certain metrics that -- as a company that we need to hit, in order to feel comfortable that those COVID risks are really out of the picture.

[Operator]

Our next question comes from Daniel Rosenberg of Paradigm Capital.

[Daniel Rosenberg, Analyst]

I was wondering, you spoke about enabling multi-tenant capabilities on the GSX platform. I was wondering if you had any time lines around that. And is there a catalyst that comes afterwards? Or is it a slower ramp? It opens a broader market for you? How should we think about that?

[John Proctor, President, CEO & Director]

Yes. Absolute mix -- I mean great question. So yes, so the -- on time line, it will certainly be this financial year, certainly, next -- some point next couple of quarters. And it's also maturity. We've got to make sure this absolutely works perfectly, mainly because going on to where we're going, this gives us much more availability into the MSP market, right? The MSPs really need a multi-tenancy environment to be able to turn this up, mainly because they target a lot of small to medium enterprise. Large enterprises can go after this directly. We can spin up a separate instance for each large enterprise, for instance, that Fortune 50 (sic) [ 500 ] company, whereas the MSPs, because of the nature of their business, they don't want to have to spin up in these times. They want a multi-tenant environment. So as soon as we get this done, it becomes much more accessible to them and much more profitable for them as well. So we do see that. That's when the uptick will start really on the MSP market. It doesn't mean our large enterprise funnel will go away. We'll still have that. And same thing with governments. We've got a number of large government opportunities at the moment, and they will run Office 365 in their own environment. So GSX Gizmo will also be in their environment. So then there aren't any even spin-up costs for that either because we don't have to do -- there's no hosting costs for us as well. So margins are even better there. But yes, the reason this multi-tenancy is so important is for that ability to make it really available for that small to medium enterprise, which is where the MSPs focus their client base. So that's where we see the uptick coming there.

[Daniel Rosenberg, Analyst]

Okay. Great. And in terms of gross margin, I mean, a particular strength in this quarter, was there anything that led to that specific to this quarter? Or should we see this as kind of the new normal as you guys continue to progress?

[Erin Crowe, Chief Financial Officer]

Yes. I don't think there was anything specific in this quarter. Our gross margins have been fairly consistent quarter-over-quarter. Obviously, we -- the SD-WAN, our Network Performance Management business is reflected in discontinued operations, so the margins would not be reflective of their gross margins. And they've often been slightly lower than the balance of the business because they are a hardware business. If you look sort of down into the MD&A, you'll see that the GSX gross margins were in the 87% range. So as that comes on sort of on a -- for a full quarter, we may see the margins decrease slightly. But I think -- I don't think we're going to see any significant changes overall in our gross margins as we go forward at this point in time.

[Daniel Rosenberg, Analyst]

Okay. And then last one for me. In terms of your new VP, Sales, I was wondering if there were any -- if there's any color you could share just on low-hanging fruit, key strategic initiatives to tackle in the near term or changes that you've made since the new hire.

[John Proctor, President, CEO & Director]

Certainly, he brings in sort of a wealth of experience on channel and partners. That's really where we're focusing his channel and his success in previous big channels with some of the big -- for instance, the big 4 consulting firms and some of the global systems integrators. We're already seeing those strategic conversations happening which we haven't had before. So I'd see, certainly in the next couple of quarters, some fairly significant potential partnerships, where they're either selling us their clients or we're white-labeling through them, so they can differentiate themselves, because, again, these guys are in competition to offer Office 365. And if you can go to the client and say, not only do you get Office 365 but we can measure the user experience. And this is part of our sort of progress. Previously, a lot of companies will use service-level agreements, right? We'll give you 99.9% uptime, which is great, except when it -- if it, say, it's Teams or whatever it is, "it's on, but I can't understand you. My conversation I'm trying to have actually isn't providing any value because you're completely pixelated and your voices sound like Mickey Mouse." So it isn't going to work. Whereas we can proactively tell you if that's going to happen. So we can -- because we have what we call synthetic transaction of robot users, we can tell you in advance if your Teams call is going to work or not, which is a huge significant advantage. So if you go to market with Office 365 and you can say, we can predict what the user experience will be in their home, you're probably going to be able to position yourself better than the competition. So I think this is where we'll see those partnerships. And that's particularly what Mike is focused on, is positioning that value proposition to these global systems integrators and then working out the business model to go to market with them.

[Operator]

[Operator Instructions] Our next question comes from David Kwan of PI Financial.

[David Kwan, Technology Analyst]

I was wondering, just getting back to the MPA business. Obviously, we saw the slowdown this quarter. And you talked about, I guess, some of the initiatives that we've got -- that's going on that should hopefully see a pickup here. But do you expect that we should be able to get back to that, call it, 25%, 30-plus percent range that we've seen historically in this business?

[John Proctor, President, CEO & Director]

So yes, I mean, this is -- I mean Mitel is doing some work as well. So yes, we've got a couple of initiatives running with them where we'll see that growth come back up. I think every IT organization in the world -- so that -- as I said, sort of the month was really -- it's been like watching a hockey game. There were certainly 3 periods in the month. Most CIOs in April and May said, "Please don't talk to me." And then June, they said, "Come help me solve this problem." And I think Mitel had upside from sort of selling remote licenses and some other pieces. Nobody was buying new phone systems in April and May. But we're starting to see that pick back up. So I think we'll see sort of return -- the numbers head back up in that respect. But at the same time, with Flex and some other initiatives we've got going, we've got a new remote access tool. We're just helping them. And even sort of our UCScore tool, which is UCScore.com and is free to test and try. We're also seeing that getting embedded with some of their capabilities shortly. So I think we'll see a return. Whether we'll see up to sort of the 30% level, I'm certainly not going to guarantee or predict that. But I think we'll see this continued shift into the cloud which they are making. As I said, we're 100% embedded in Flex. So the numbers will be picking back up as we see that growth rate come.

[David Kwan, Technology Analyst]

Okay. And how about on the Savision side? I know there's been some revenue growth headwinds as it relates to the migration from perpetual license customers onto subscription -- onto subscription revenues. Can you talk about the revenue trajectory you see for that business?

[John Proctor, President, CEO & Director]

Yes. Well, the interesting thing is size of deal. We're seeing some much larger deals start to come into the pipeline. And by that, I mean 6- to 7-figure deals which normally are usual deals for iQ with 5 figures. Now we're seeing 6- and 7-figure deals come in here. And a lot of it's around this ability to monitor Azure and those instances, and a lot of them connected into that Microsoft ecosystem because people are starting to realize, I need to do this. I sell -- for instance, I think we've mentioned Visma as our client. They do financial software as a service. They host that in Azure. And being able to monitor their Azure instances and provide the clients that access becomes quite key. So we see that as a repeatable model into other software-as-a-service companies, so selling our capabilities to our counterparts in that SaaS business becomes key.But like any large deal, they take a little bit longer to close. But yes, the pipeline is pretty solid there. And then particularly as we integrate into the single instances we bring, so the latest release of MPA is fully integrated into iQ. So if you've got MPA, iQ can monitor MPA, can monitor all these other technologies simultaneously. All the integrations that we do with iQ, you can now monitor your Mitel phone system as well. And now we're going to add GSX. That's one of the other key R&D focus points, is bringing GSX into that iQ environment as well as an integration. So that will also add on to the value proposition there. But for us, key is getting sort of these -- some of these big, large opportunities closed, which is this -- again, as you've mentioned, is also monthly recurring revenue moving away from the sort of the 5-figure perpetual licenses into fairly large, consistent monthly recurring revenues.

[David Kwan, Technology Analyst]

That's helpful, John. As it relates to GSX, can you talk about the revenue trajectory you expect there? Obviously, they've got that legacy Lotus business. And so just kind of want to get a sense of when you expect we could start to see probably growth in the overall revenue. I know that Microsoft business has obviously grown at a pretty nice clip. But just from a total revenue standpoint for GSX, when you expect the growth in the Microsoft business can more than offset the related churn in the legacy business?

[Erin Crowe, Chief Financial Officer]

Yes. So I think if you look at the split of the revenues between the 365 business and the legacy piece, it's in that 75% 365, 25% legacy right now. That's approximately the split. So as the 365 piece continues to grow as a proportion of the revenue, we will certainly see overall revenue growth, right? If you look historically, we sort of had that the weight around the ankles of the larger proportion of the legacy revenue declining, while the smaller proportion of 365 grow. I think we're ready to turn the corner there from a revenue growth perspective. And as we look forward, with some -- with the growth rates that we've seen in the 365 space, we certainly think that, that is very near term, that we'll start to see that revenue growing.

[David Kwan, Technology Analyst]

So Erin, by the end of the year, it sounds like or in the next few quarters?

[Erin Crowe, Chief Financial Officer]

Yes. I think that's probably reasonable, yes.

[David Kwan, Technology Analyst]

Okay. Perfect. And then as it relates to the MRR that you guys had disclosed, I guess, have you changed the calculation on that? Because if you just, for example, take the MRR that you talked about for Q1 this year, you'd get $4.5 million quarterly run rate, which is obviously nicely higher than what you guys had posted in the quarter. I'm just wondering if you've changed how you've calculated it versus what you did in the past.

[Erin Crowe, Chief Financial Officer]

No. So the only difference for Q1 is the fact that we had only 1 month of GSX. So we basically -- we averaged the revenue for the quarter across the MPA and iQ businesses and then added that 1 month of GSX on. So the $1.5 million is an MRR number if you look sort of at the end of the quarter for this quarter. Does that make sense?

[David Kwan, Technology Analyst]

No, that makes sense. I assumed it sounded like it was more as a June run rate MRR.

[Erin Crowe, Chief Financial Officer]

That's -- yes. I mean you could look at it that way, definitely, yes, because we took GSX and added the 1 month on because it didn't really make sense to average out 1 month of GSX over the quarter for MRR purposes.

[David Kwan, Technology Analyst]

And what was that number? I know you took the number from last year, which I think was just taking a look at the entire quarter. I guess trying to get an apples-to-apples basis, what would have that number been, I guess, especially taking out whatever would have been included for Elfiq?

[Erin Crowe, Chief Financial Officer]

So this splits about 2/3 of the -- like the Savision and MPA business and 1/3 GSX right now, if you look at the MRR split.

[David Kwan, Technology Analyst]

Okay. No, I'm just trying to get a sense of -- because I know when you talked about the MRR for last year, the number that was disclosed was what was included for -- that included Elfiq, amongst other things. I'm just trying to get what an apples-to-apples number would have been.

[Erin Crowe, Chief Financial Officer]

So Elfiq was approximately $100,000 of MRR historically.

[David Kwan, Technology Analyst]

Okay. Okay. Perfect. And Erin, just on the OpEx, can you quantify roughly kind of how much was, I guess, adjustment to reductions that were related to COVID? I'm just trying to get a sense of once you guys kind of return to normal, how much of an uplift we should expect to see in OpEx.

[Erin Crowe, Chief Financial Officer]

Yes. So on a run rate basis, like for the impact of some of the temporary measures that we implemented was just under $100,000 for the quarter -- or sorry, just under $200,000 in this quarter. The other piece, obviously, relating to COVID is the fact that there's been limited travel and other spending as people are pretty limited in their activities right now. So I think those are really the 2 factors that would be key when we look at the quarter and the COVID impact.

[David Kwan, Technology Analyst]

Okay. And I guess when you lock that in with the kind of the commentary of trying to balance out profitability and investments for growth that there is the potential that you could possibly swing back into the negative, probably not significantly, in the coming quarters here based on opportunities that you're seeing as it relates to pursuing additional growth?

[Erin Crowe, Chief Financial Officer]

Yes, I think that's fair, right? If you look at -- we did implement these temporary measures in the face of COVID. We -- but we really have to look right now at balancing those operating expenses. And we do expect that at some point in the future, they will normalize and balance that with profitability -- sorry, balance that profitability with the investments that we need to grow the MRR, and that's sustainable. Delivering that sustainable revenue does require some investment. And so we are certainly balancing those competing priorities around EBITDA positive and revenue growth at the moment.

[Operator]

This concludes the question-and-answer session. I would like to turn the conference back over to John Proctor for closing remarks.

[John Proctor, President, CEO & Director]

So thank you, everyone. On behalf of all of us, thank you for your interest in Martello. As mentioned earlier, you can reach us by e-mailing [e-mail]. And a recording of today's call will be available on our website later today. Thank you all, and have a great day.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.