Martello Technologies Group Inc

XTSX:MTLO

Earnings Call Transcript 2020-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Martello Technologies Group Fourth Quarter and Fiscal Year 2020 Investor Conference Call. Today's call will provide information and commentary on the fourth quarter and 2020 fiscal year financial results by Martello Technologies Group. 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]. First, here are a couple of quick 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 Chief Financial Officer, Erin Crowe. Erin?

[Erin Crowe, Chief Financial Officer]

Thank you. To start, I want to remind people that Martello is a global technology company, providing digital experience monitoring solutions that monitor and analyze the user's experience of real-time cloud services like voice over IP and video streaming. Martello has thousands of customers in more than 175 countries around the world. Before I review the numbers, I'd like to provide some context to our results this quarter and for the 2020 fiscal year. I'm pleased that our focus on growing MRR and becoming profitable has yielded results, with year-over-year monthly recurring revenue growth and a near breakeven adjusted EBITDA loss in Q4 of fiscal 2020. This has given us a degree of resilience amid the global disruption of COVID-19. And by divesting of the Elfiq SD-WAN business, we can focus our resources on the digital experience monitoring opportunity, which has accelerated as a result of COVID-19. This progress provides us with a solid foundation as we onboard GSX, which was acquired in May 2020. I would remind everyone that GSX financial results will be reported in August as part of our Q1 fiscal '21 results and has no impact on the results discussed today. Monthly recurring revenue was $990,000 in the fourth quarter of fiscal 2020, an increase of 13% compared to the same quarter during the prior year. Total revenue was $13.1 million in fiscal 2020, up 27% from $10.4 million reported for fiscal 2019. The recurring portion of total revenue was 89% in the 12 months ended March 31, 2020, or $11.7 million compared to 78% of total revenue for the 2019 fiscal year or $8.1 million. Total revenue in the fourth quarter of fiscal 2020 was $3.3 million, down slightly from $3.4 million reported in Q4 of fiscal 2019. Recurring revenue was 90% in Q4 of fiscal 2020 compared to 78% in Q4 fiscal '19. Growth in the proportion of recurring revenue is due to growth in UC Performance Analytics revenue, which was 99% recurring in fiscal '20 compared to 95% in fiscal 2019 and also due to the continued shift from perpetual licenses to subscription sales and IT operations analytics. Organic revenue from sales of UC Performance Analytics software to the Mitel channel in the 3 and 12 months ended March 31, 2020, grew 25% in both periods compared to the same periods in fiscal 2019. Gross margins remained strong and consistent at 94.2% in Q4 of fiscal '20 and 92.8% in the 2020 fiscal year compared to 92.1% in Q4 2019 and 93.2% in the 2019 fiscal year. Onetime noncash impairment charges of $3.4 million were recorded in Q4 FY 2020 relating to goodwill impairment of $2.4 million and intangible asset impairment of $1 million in the network performance management or Elfiq segment.Martello has made a strategic decision to divest itself of the SD-WAN business to focus on its DEM strategy and expect to benefit from the elimination of losses related to this segment in the near term. These impairment charges resulted in increased expenses and an increased loss from operations in Q4 FY '20. Operating expenses decreased by $570,000 in Q4 FY '20 as compared to the prior year, excluding the impact of the onetime noncash impairment of goodwill and intangible assets I've described and acquisition-related costs. This was a result of a strategic initiative to reduce costs in view of the uncertainty surrounding COVID-19, including delays in filling vacant positions and a decision to reduce bonus accruals relating to FY '20. As well, travel and event costs were reduced slightly due to cancellation of events and reduced travel in view of COVID. Adjusted EBITDA was a loss of $150,000 in the fourth quarter of the 2020 fiscal year compared to a loss of $830,000 in the same period of fiscal 2019. Adjusted EBITDA is a non-IFRS financial measure, which assesses operating performance before the impact of onetime costs associated with acquisition activity and noncash expenses. On an annual basis, adjusted EBITDA was a loss of $2.5 million in fiscal '20 compared to a loss of $1.7 million in fiscal 2019. Due primarily to the onetime noncash impairment charge of $3.4 million recorded in Q4 of fiscal '20 as described relating to the goodwill and intangible assets of Elfiq, the loss from operations was $4.6 million in Q4 2020 and $8.3 million in fiscal 2020 compared to a loss of $1.3 million in Q4 2019 and $4.3 million in the 2019 fiscal year. The company's cash and short-term investments balance was $5.9 million at March 31, 2020, compared to $6.6 million at March 31, 2019. Subsequent to March 31, 2020, 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.The company will continue to closely monitor the COVID-19 situation and its impact on the global economy. And at this time, we are confident that we have sufficient available cash and working capital to fund our organic growth strategies 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. Thank you for joining us today, and I hope you continue to stay safe and healthy. I'll talk today about Martello's strategy and outlook, and I'll begin by providing an update on the ongoing COVID-19 pandemic and its impact on Martello. COVID-19 has disrupted the global economy. While this creates headwinds, it has also created opportunity for Martello. Digital transformation initiatives that were expected to roll out over 5 years have been rapidly accelerated to meet the demands created by COVID, whether its remote work or telemedicine. This has resulted in greater urgency to deliver reliable cloud-based remote collaboration services like video conferencing and office productivity suites. To enable a global workforce, these cloud host solutions need to be available, and they need to work reliably. This is Martello's mission, to improve the user experience for these business-critical cloud services. As Erin has said, we've established a core resilience that sets us apart from many other businesses due to our predictable revenue model, strong gross margins and solid management of operating expenses. I am pleased that in the midst of market volatility towards the end of the year, we were able to grow our monthly recurring revenue by 13% year-over-year and reduce our EBITDA losses to near breakeven in Q4 of fiscal 2020. Martello's mission is to provide the industry's clearest picture of the digital user experience. To this end, Martello made several strategic decisions subsequent to March 31. The acquisition of GSX broadens our DEM offering into the rapidly growing Microsoft Office 365 space. Headquartered in Switzerland, GSX is a Gartner-recognized DEM vendor that specialize in Office 365. This strategic acquisition will increase Martello's monthly recurring revenue significantly and give us access to an addressable market of 200 million monthly active users of Microsoft Office 365.At the same time, we are divesting of the Elfiq SD-WAN line of business to ensure we have the resources we need to pursue this growth market for DEM. Discussions with a third-party to purchase these assets of this division continue to progress, and we expect to have an update on this very shortly. This decision was taken because the Elfiq's division business is not aligned with our renewed SaaS-based DEM strategy and our monthly recurring revenue focus. I'm pleased to welcome the key new members to Martello's senior leadership team with the addition of Mike Danforth as VP, Global Sales and Partnerships. Mike's role is to drive growth of our DEM solutions in both the Mitel and Microsoft channels with global partners and through direct sales. Mr. Danforth had strong relationships with industry players like PwC, Salesforce, Accenture, Deloitte and Microsoft and a proven track record of bringing value to customers and partners. I'd now like to provide some additional color today on our strategy to achieve DEM market dominance. We have a focused strategy to expand the addressable market through our DEM monitoring and analytics capability and bring value to enterprises using cloud based services.Our partnership with Mitel continues to grow even as we diversify our revenue stream through acquisitions. The Mitel channel is important to Martello's monthly recurring revenue growth and DEM strategy. As the world has shifted to remote work, Martello supports many of the Mitel remote collaboration platforms that are experiencing growth in demand and earns a royalty on sales of premium software assurance for them. As Mitel continues to provide its customers and partners a path to cloud communications, Martello has an increasingly important role to play, delivering strong voice quality and user experience to these Mitel solutions, and we expect continued strong growth in this channel. Microsoft is a key channel for Martello's DEM solutions, which includes Martello iQ, a service monitoring and analytics platform to provide insight into the performance of the IT infrastructure supporting Office 365. I'm pleased to see large enterprise opportunities in the pipeline in this segment, along with sales resulting from a strategic partnership with Paessler. I'm also pleased with the early activity following the acquisition of GSX in presenting a value proposition for the Microsoft community that leverages both iQ and GSX solutions combined. The successful integration of GSX is critical to Martello's DEM strategy. Integration is a deliberate process with many interdependencies to consider, and we will manage this process thoughtfully with a robust integration plan. This plan is designed for efficient integration that does not disrupt any existing revenue streams. And we're tracking several key milestones from a product and sales perspective as this process moves forward. We expect most integration activities to complete within 12 months. And I want to reiterate how thrilled I am to welcome the GSX team to Martello. I'm pleased with the early synergies and collaboration I'm seeing as we begin to execute on our integration plan. As we focus on growth, we continue to be vigilant in managing operating expenses. We've decreased operating expenses significantly by reducing full-time headcount, reducing employee salaries by 15% temporarily, decreasing discretionary spending and reducing our focus on the Elfiq SD-WAN business pending a sale of this division. Our most important asset is always our people. As you know, to protect the health and safety of our team, all employees have been working from home since March 16. We are currently seeking input from our people around the world as we make plans for the future, with respect to how and from where we will work. The health and safety of our team members are key priorities as we pursue these plans. I'll leave you today with my perspective on Martello's critical priorities in fiscal 2021. Our mission is to be a leading enterprise DEM vendor, and we will be laser-focused on this. Growing monthly recurring revenue for our DEM solutions will be key to Martello's success, and we will continue to push towards profitability.Finally, we are focused on successfully integrating GSX and growing that business materially under the Martello umbrella. I look forward to sharing progress and results in the quarter to come. And I'd like to thank you for joining us today and wish health and safety to all of you and your families. Erin and I are here now to answer your questions. And operator, would you please facilitate the question-and-answer part of this call.

[Operator]

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

[Kevin Krishnaratne, Principal & Equity Analyst]

I have a couple of questions for you first on the Mitel. So John, you mentioned how demand at Mitel is increasing. Can you just talk about how that's translated into new business to you, just in particular in light of COVID? Have you seen any benefits or any uptick in new MPA user growth, maybe a little higher or just different than what you might have experienced, say, last year or the year before? Just kind of what are you seeing in more recent months?

[John Proctor, President, CEO & Director]

Sure. Kevin. Yes, absolutely. So there's a couple of things. The first is one of the key aspects of our solution we do for Mitel is remote access. So if you're a Mitel partner that offers Mitel remote -- Mitel phone systems as a service, whether that's MiVoice or whatever any other systems they are. If you want to go and access that system without having to send a tech on-site with a laptop, and in current situations in full PPE, you need our solutions. So we certainly see an uptake on remote access requirements and therefore, increase on licensing for that. But at the same time, Mitel has seen an increase in the ability to use phones for home. They've actually sold probably more in the last 3 months than they have in 2 years of that. So much as we've heard sort of the black phone is dead. No, people have just taken them home and reconnected them through the Internet. So -- and again, MPA fits into that to be able to see are those phone calls still working, happens. But then if you look at the Flex, which is their new product coming out inside Google Cloud, again, that's us. We're fully embedded in that one. In fact, we're the on-boarding system. They've used MPA as the on-boarding system there. So again, we're starting to see that pick up. And now one of our latest release, we added a new -- yet another phone system on, and we had our first one of the licenses sold for the new phone system, which is the 5000. So that first one is going out and we see more of those to come. So it's been steady growth in Mitel that we are connected to. And at the same time, we're seeing new products coming out of Mitel that we're even more connected to. So the relationship is strong, and we're seeing growth in that area.

[Kevin Krishnaratne, Principal & Equity Analyst]

That's great to hear. And so I guess I'm wondering your thoughts on how you view the business, specifically the MPA subscription business? That line item grew 26%, 25%. That's sort of been the level that you've been growing over the past several quarters, largely being driven by new MPA users coming on. Of course, I think a year ago, you had the royalty payment fee change. But just as you think about going forward, what type of visibility do you have? What type of confidence do you have? Just how do you think about that business and your confidence in maintaining that subscription growth rate that you've been experiencing the past few quarters?

[John Proctor, President, CEO & Director]

I mean it's a good question. And the key point there is obviously tied to Mitel, and Mitel is innovating. You look at some of the pieces, what is interesting on a recent partner call, Mitel mentioned how they're connecting themselves to Microsoft, they're connecting their phone system, their own effectively Zoom collaboration, their version of that. They're connecting that to Microsoft. So again, with our own acquisition of GSX and our own Microsoft connections, we become just as aligned as we were before. So I think we will continue to see that level of growth and -- as this remote working becomes stronger. And I think the other thing is we're seeing CIOs settle a bit. We've had that initial number of CIOs struggling with the, okay, hold on, my workforce is completely spread out. They've gone from the office, they're all spread out. So therefore, I've got to find something quick, cheap and cheerful to get them on and connected. And now they're starting to pause and say, well, hold on, now I need something a bit more enterprise-grade and that's where Mitel fits. If you're looking for enterprise-grade level connectivity where you can chat, video conference, send files and connect altogether, you're not looking for the cheap and cheerful solution, you're looking for a more disciplined, well-balanced technology, and that's where Mitel comes in. And again, MPA plugs into all of those solutions that Mitel offers.

[Kevin Krishnaratne, Principal & Equity Analyst]

Great. Great. Very helpful, John. I just wanted to switch over to GSX now. I know it's not in the Q4 numbers, but you've had the unit under operation for about a month. Just as a high level, I just recall the business, about 75% of it was tied to Microsoft or Office, and that business had been growing 35% -- 30%, 35%. I'm wondering what you're seeing there? How the profile might be looking again in light of COVID and remote working? And just number one, on the Microsoft business. Can you remind us what the remaining business is and what the growth profile is there? And what are the opportunities on that side?

[John Proctor, President, CEO & Director]

Sure. I'll give you the first part, and then I'll hand over to Erin. So the legacy business is Domino, which not many people still operate. But surprisingly, they still get renewals. Some CIOs, like I said hunker down, they're not willing to change the Domino, which any tech heads on the call will recognize is very much a legacy product. But again, like I said, it's still renewing. But we -- again, we still -- we see that one over time reducing. But the uptake of the GSX Gizmo and the Office 365 is significant. We've had -- closed a fairly significant deal just before the end of last month with a very large U.S. company. We're very pleased with that one. And again, we removed -- in that case, we actually removed one of our competitors. So not only did we take on a very large U.S. institution, but we removed one of the competitors from that space. So we're very pleased in that growth area with GSX, and we see that continued. And again, what is interesting there, Kevin, if you look at the Mitel partners, a lot of them offer Office 365 and Mitel phone systems and they're getting calls of why don't I just go to Teams? Why don't I just have Teams of my piece? And the answer is, well, hold on, we can integrate MPA, and we can integrate GSX. So we can give you a single picture of what you're going. You don't need to transition on to something like Teams, you can keep your Mitel phone system and keep your Office 365 system, and we can make sure both are providing the user experience you expect. So again, it's a real positive story in that respect. But I'll hand over to Erin just to get her perspective on that as well.

[Erin Crowe, Chief Financial Officer]

Yes. I think the one -- the thing I would add there, Kevin. So we certainly don't see any change on the growth trajectory for the Office 365 product. The legacy product, I mean, we have said since the beginning, we expect that to sunset really over the next couple of years as that -- as people transition away from the Domino platform. However, I would also point out, right, there's minimal investment going into that line of the business. So it is a profitable part of the GSX business, which allows us to harvest that revenue and reinvest in the growth of the Office 365 product.

[Kevin Krishnaratne, Principal & Equity Analyst]

Okay. And then that's actually interesting, John, the large deal with the U.S. company on GSX. Can you elaborate on that a little bit more? Is that something that was helped or accelerated by being under the Martello family? Did that come through a Mitel partner? Or is that something -- I just want to understand the dynamics there. Is that something that was helped by being part of Martello? Or was that in the works beforehand?

[John Proctor, President, CEO & Director]

So I'm going to say no, that the team had this in hand anyway. I mean, much as we sort of stepped in and sort of said how we go in, what guidance do you need, and they closed it. It was already in the pipeline before the acquisition. But certainly, we supported them to get it closed. But what is interesting is we're starting to see some early synergies with a couple of clients. We have one where they just closed one of the large consulting firms in Europe. And we had just started talking to them about the iQ product. Those conversations are now accelerating because they see the integration between iQ and the GSX Gizmo as something they definitely want. And this is one of the large global consulting firms. So we're very pleased with some of those early synergies. And much as I mentioned on the call, we've been very deliberate with our integration. Seeing extremely enthused sales guides having to say, well, hold on, we've got to make sure we continue with the opportunities now; we can't suddenly disrupt that by getting all excited and trying to push too hard, is fabulous. So the sales team are pushing hard. They see the synergies, they see the potential cross-sells. To a certain degree it's making sure we're staying on track with current pipeline and current focus so we don't disrupt.

[Kevin Krishnaratne, Principal & Equity Analyst]

Got it. Maybe just the last one, just rounding out some of the financials, just on EBITDA and OpEx line items. A couple of things. Number one, just in the quarter, I understand the dynamic of delays in hiring and travel and marketing, all of that. But curious on the bonuses. Is there a number that you can provide us in terms of the level of bonuses that were deferred? And when can we expect to see that in 2021? Or do we expect to see that in 2021? And then just second, more broadly on the OpEx items. Just help us kind of understand how to think about R&D, G&A and sales and marketing, Q1, maybe for the year relative to what we saw in Q4?

[Erin Crowe, Chief Financial Officer]

Sure. So on the bonuses, so that was a onetime adjustment in Q4 to really essentially eliminate a couple of hundred thousand dollars' worth of bonuses that we had accrued for fiscal '20. Given the salary reductions and the activities that we're undertaking just around headcount, we felt that it was appropriate to just reduce the bonus payouts for fiscal '20. So we don't expect that to -- it's not a deferral. It's gone. And from an OpEx perspective, I think when we talk about R&D, G&A, if you think about the OpEx right now, we've, right now from a headcount perspective, which is the bulk of our OpEx at the end of the day, we have -- we will see reductions based on the salary reductions that we have had, based on the furloughs in the net tech business. And then we will see OpEx reductions as well across the board based on the fact that after we divest Elfiq, that headcount will be gone completely. Obviously, we'll be bringing GSX on, however, so those will sort of offset to some degree. But I think we are really looking at a disciplined approach to our OpEx right now from a headcount and other cost perspective. So I don't see -- if you were thinking about the current fiscal year, I wouldn't be anticipating any significant increases, particularly in the early quarters as we're still within the sort of salary reduction time frame. And that will only move up as we hit milestones around meeting our targets and everything else for the year.

[Kevin Krishnaratne, Principal & Equity Analyst]

Got it. And so again, and just your view of reaching profitability, any thoughts there? I can't remember if you've mentioned that would come later this calendar year or early next year into the fiscal 2021, end of fiscal 2021 in terms of turning profitable?

[Erin Crowe, Chief Financial Officer]

Yes. So we've been pretty clear that we are very focused on getting to that sort of adjusted EBITDA positive position by the end of this fiscal year based on what we've seen in Q4 and the various initiatives that we've undertaken, including the divestiture of Elfiq. So once that's concluded and reflected in our results that will obviously improve our bottom line as well. So we think that, that trajectory is putting us in clear view of being adjusted EBITDA positive by the end of the '21 fiscal year. I think we have to bear in mind that we've just made a large and very strategic acquisition. And I think with the COVID disruption, we see a really large opportunity for growth in front of us. So we are really looking at how to balance that investment for growth with the discipline on the OpEx side and the drive for EBITDA positive. So those are the conversations we're having right now, but still very focused on that trajectory towards EBITDA positive.

[Operator]

Our next question comes from David Kwan of PI Financial.

[David Kwan, Technology Analyst]

You guys gave some good clarity I think on the revenue trajectories for several lines of businesses. One that maybe you didn't talk about was on the Savision IT OPs business. When we look at least on the subscription revenue over the last couple of quarters, it's been up nicely year-over-year, a little bit more subdued on a quarter-over-quarter basis. Can you kind of talk about how you see that business growing over the next year or so?

[John Proctor, President, CEO & Director]

Erin, do you want to take that one? Or do you want me to start?

[Erin Crowe, Chief Financial Officer]

Yes, sure. So I can talk to sort of the revenue piece. And so yes, so the Savision business, I think, we have seen growth in the subscription piece of it. We've been very, very focused on driving the subscription revenue over perpetual deals. And we've also been focused on growth of the iQ product, which is in the DEM space, which is obviously our strategic focus right now. So I think in Q4, we felt a little bit towards the end of the quarter that as COVID hit, that's really where we probably felt the biggest impact of COVID, I would say, in this quarter was on the IT operations analytics revenue and just bringing the new deals in towards the end of the quarter. But I think it's important that we continue to focus on that conversion from perpetual to recurring, and we reached that 90% recurring in fiscal 2020 and that we continue to focus on the bookings as well, right, and ensure that we've got that stable bookings base and that we're retaining our customers. I think it's important as well. We've talked about the fact that we want to move both our IT operations and our GSX products onto a multi-tenant cloud SaaS platform, and that will create a large opportunity to expand the addressable market for those products. So those are really the areas we're focused on around growing that Savision revenue stream.

[John Proctor, President, CEO & Director]

And just to add to that, David, if I look at sort of iQ release and it was release 2.9. MPA is now fully integrated into iQ, so our ability now to really focus on all those MPA clients and get them into iQ. And what becomes key here for iQ is this GSX integration. GSX Gizmo is really, really good at saying where you have problems in that Office 365 environment. When you add it into iQ, it tells you why. So we've gone from what, and now we can add why. So this becomes really important because when you look at sort of when -- this as a service, if you are sitting at home in British Columbia and something in the office space, be it Teams, be it Share Point doesn't work, who do you blame? We call it the logo blame game. Do you blame Microsoft? Do you blame your ISP? Is it your house network? Who is it? And if you're a service provider that's delivering this, that's really important to avoid that logo blame game, that it's not the service provider, it's not Office, it's the ISP between you or it's your own network. Because not being able to identify which part of the environment is at fault is actually quite expensive because you can spend a lot of time troubleshooting. So this connection between GSX and iQ is important. That, as I said, with iQ release 2.9 that MPA integration, that really pushes our ability to go into the Mitel space and focus on all these MPA clients with iQ as an offering.

[David Kwan, Technology Analyst]

That's helpful. And on that integration for both, I guess, GSX and iQ into the multi-tenant cloud. Can you talk about the time lines for that?

[John Proctor, President, CEO & Director]

Yes. I mean, this is where we see -- I mean, it will be this financial year. It's on the product road map for this financial year. We're going to accelerate as fast as we can with a whole bunch of other pieces. And we've sort of -- when we look at sort of one of the key reasons that GSX agreed to what they wanted to do, it was this cloud-based multi-tenancy, which is where Martello has expertise and GSX had a little bit of expertise but not enough to be able to accelerate as they would like to. So we're going to balance all the other requirements into that space to get that done and accelerate that cloud, those multi-tenancy. So it will be this financial year, and we're aiming sort of, end Q3, beginning of Q4, to be able to bring that out.

[David Kwan, Technology Analyst]

Okay. Perfect. Just on the GSX revenue, just understanding the legacy business is in decline, not quite sure in terms of the trajectory on when do you expect that to fall off. But would you guys expect that the GSX business as a whole could start to see a material pickup in overall growth, obviously driven by the Microsoft business maybe towards the end of this year, fiscal year?

[Erin Crowe, Chief Financial Officer]

Yes. So I think -- so the legacy business in 2019 was about 25% of their revenue. And we're obviously seeing a decline in that piece of the business and a strong growth in the other 75% of the business, the Office 365 piece. So as -- I believe that as the proportion of revenue from Office 365 continues to grow, we will start to see that growth in the GSX business as a whole. As I've said before, their revenue growth has been muted over the last couple of years by the fact that this legacy business has been declining. But as that proportion of Office 365 grows and that growth trajectory continues, we will start to see that coming through on the revenue numbers.

[David Kwan, Technology Analyst]

So Erin, is that possible, I guess, to see that growth on the Microsoft business more than offset the declines on the legacy business in second half of this year?

[Erin Crowe, Chief Financial Officer]

Yes. Yes. I think it is. If we were to look at the different quarters, I think we would certainly start to see that towards the end of this fiscal year.

[David Kwan, Technology Analyst]

Okay. Just a couple more questions. As it relates to the OpEx, the decline that we saw this quarter, I guess, just normalizing for onetime items and the like, I guess the acquisition costs and goodwill and intangible write-down. Can you comment on how much of that decline in kind of the core OpEx was more onetime in nature, I think, primarily related to COVID? And did you receive or whether it's in Q4 or even into Q1 here, any government funding like the COVID relief, whether it be here in Canada or even in Europe?

[Erin Crowe, Chief Financial Officer]

Yes. So Q4, the onetime items were in the $300,000 to $400,000 range, I would say. So that gives you a sense of the normalization, I guess. And then with respect to government funding, there's nothing reflected in Q4. We have some small amounts of government funding in Q1, but nothing material.

[David Kwan, Technology Analyst]

Okay. Perfect. And can you -- where is headcount right now? And when are you guys planning on resuming hiring?

[Erin Crowe, Chief Financial Officer]

So headcount right now is about 120 people between Martello and GSX. We have the -- that includes some of the -- well, there are some employees at Elfiq who are currently on furlough as we sort of move towards closing the deal on Elfiq. We don't have any plans to increase our headcount significantly this year. We've been replacing some positions recently as there's been attrition, but no plans to start driving significant increases in headcount over the course of the fiscal year at this time.

[Operator]

[Operator Instructions] Our next question comes from Daniel Rosenberg of Paradigm Capital.

[Daniel Rosenberg, Analyst]

Just had a high-level question regarding the product road map. You mentioned a number of initiatives for this year. The longer term to really position yourself for -- as a leader in experience management, what are the areas that you think could be interesting are emerging today that in a few years this might be an interesting opportunity for you guys?

[John Proctor, President, CEO & Director]

Yes. So I mean, great question. What it speaks to is we do see some competition in there. As I mentioned earlier, we've already displaced one of them in a nice large deal in the U.S., but you can't rest there. So there's a couple of things. So the first is really looking at how do we improve that picture, whether it's things like network path visualizing. So you can actually see, not just have text on where your data is going to and from and where the issues are. I've mentioned cloud-based multi-tenancy. But also it's SaaS monitoring, much as we can do Office 365, there's no reason we can't expand this into other areas of user experience, whether that's things like Salesforce, ServiceNow or other things. What this -- we call it the robot user, but it's actually the synthetic transaction. As these enterprise environments get really, really complicated with people working from home and complex, and they're trying to understand how do I, as a CIO, support this new environment, one of the ways to do it is use these robot users, synthetic transactions. Before you architect your new enterprise environment, you can actually test it. You can find out, will Teams work across this environment? Will -- if I run Office 365 from the cloud across my whole enterprise, what will the user experience look like before I buy it? So there's a whole bunch of things that we can do there that actually support this new complexity of work from any time, any place, anywhere. And much as I said earlier, we're looking at how we will come back to work. I think every company is the same. And nobody really has a good handle on what this will look like. At the same time, geographically, I think it could be different as well. So being able to support an IT Director or CIO, who is trying to figure out how does he look at a hybrid cloud environment and make sure that he can deliver a user experience across his enterprise in such a way that it brings value, I think that's where we'll be focusing. And as I said, everything from increased service -- software as a service monitoring, network path visualization and other pieces. The other thing I think we'll see is maturity. At the moment, you've got managed service providers that offer service level agreements. Well, the service just says, we will deliver 99.9% uptime. I think the maturity will come to Experience Level Agreements or XLA's. And if you look at something like an experience level agreement, then you're holding your managed service provider to account for what is the quality of my conversation on Teams? What is the quality of my conversation on any sort of video conference? Or what is the quality of my Office 365 experience? And that's moving up the value chain. That's no longer just saying, I want, 99.9% uptime, that's saying I want 99.9% of my voice calls to be completely understandable with no distortion. And we can measure that. And I think that's where you'll see us really focusing and bringing value into that MSP environment. And that's also part of that cloud based, multi-tenancy is getting into that space and that multi-tenant environment for the MSPs. What is also interesting is we've had a number of tech companies approach us since we announced the GSX acquisition to discuss white labeling. So I think you'll see some -- a lot of work in that space for us as well, in that partner space. And that's really where Mike Danforth coming in helps us on that partner side. Because when you look at sort of that level of white labeling, which is affectively what we already had with Mitel, we're going to transition that into a much bigger white labeling and partner environment for the future.

[Daniel Rosenberg, Analyst]

That's great to hear. And then in terms of the competitive landscape, I mean, we've seen kind of you guys remain agile and even accelerate some parts of your business in this environment. I was wondering if you could comment on any changes in how you view the competitive landscape given what the world is these days.

[John Proctor, President, CEO & Director]

Yes, sure. So I mean, we've mentioned this. Within Mitel, we are the analytics tool that is available. So that's a great competitive landscape for us. But obviously, as one of the things we -- in the SD-WAN space, which is why we're divesting, most of the analysts on the call know SD-WAN got really, really busy. There were so many definitions it became quite a competitive and difficult environment to penetrate. When I go into the DEM monitoring space, one of our key competitors just got acquired. So -- and we've mentioned one of our -- Cisco just acquired one of our key competitors. And that will be interesting to watch how that works. And I think looking at Gartner and who they see as our competition, we've just displaced one of those, and I think we bring certain benefits on that. So I think people will start looking at the DEM space. If Cisco just acquired one of our leading competitors, I think some of the big companies are starting to realize DEM is truly a thing. And I know that sounds a bit trite, but it is, I said, this is that maturity going from service level agreement to experience level agreements. And I think if you look at the next 2 to 3 years, DEM will become a very dominant measure of value across the enterprise environment.

[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]

Thank you very much. On behalf of all of us, thank you for your interest in Martello. As mentioned all -- earlier, you can reach us by e-mailing [e-mail]. And the recording of today's call will be available on our website later today. And if you have any questions, please reach out to that e-mail address. Have a great day, and thank you for your attention.

[Operator]

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