Tag Archives: MTLO

Jan 2021 Update – $OSS.v, $ISV.to, $STC.v, $VLN.to, $VMD.to, $SYZ.to, $MCB.to, $FRII.to, $RELL, $MTLO.v, $DWSN

Trying something new this month to catalogue some recent market activity and my thoughts around it.

Thoughts on Market Activity

I’m sure you’ve heard of activity around wallstreetbets reddit board and the short squeeze on some heavily shorted names (Gamestop being the most well known). Sorry to disappoint, but I won’t be participating in the short or long side of that corner of the market. It’s too risky for me. It is absolutely fascinating to witness in real time. I have been overly curious to understand what the thought process is for the individuals on each side. I will admit I have probably spent too much time listening to finance and non-finance people explain why they feel the way they do about it. Anyone interested in hearing some anecdotal data I’ve collected can send me an email or DM on Twitter.

I am not a macro guy. I can say that I have been finding interesting ideas lately, but I have not stumbled across businesses that I feel warrant a very large position in the portfolio. I am sitting on a higher than normal amount of cash, but that can change in a few weeks.

Posts this month

Relevant News from Companies Profiled Recently

  • OneSoft Solutions ($OSS.v)
    • Another customer signs on to integrate CIM into their pipeline operations
      • 4th customer in 3 months
      • This is a big positive and shares are up a bit for the month (about 15%)
  • Information Services Corp ($ISV.to)
    • They announced that they ratified a collective agreement with their in-scope unionized employees
      • They did this virtually which is good to hear
      • Provides 6 years of stability with the members with modest wage increases
  • Sangoma Technologies Corp ($STC.v)
    • Update on cyberattack
      • Had no material impact on sales or additional risks to the business
    • Huge acquisition announced
      • The had a call on Jan 29th to discuss
      • More details to come in the next few weeks
      • On the surface the acquisition seems like it is a good fit for the business and will further increase their value to customers, but the valuation is not cheap
        • This is common for Sangoma; all previous acquisitions looked a little off at first glance, but ended up being very well executed
      • I’ll likely to a more in depth post to help myself digest the news
      • As of this morning the shares are halted
  • Velan ($VLN.to)
    • CFO resigned to join a private owned company
      • Doesn’t seem a material event on the surface as he is staying to help transition the role
      • Would like to see a new CFO within a reasonable amount of time
    • Reported fiscal Q3 2021
      • The quarte was better than expected though covid is still having an impact on the business
      • They were able to execute the V20 plan remotely
      • They have the highest backlog in 8 years
      • Sale of the montreal plant resulted in a gain on the balance sheet
        • To me this gives additional margin of safety as looking at this as net-net gives no value to PPE which obviously has some value
    • I honestly think that this is one of those weird names that could earn more ebitda in a few years than the market cap in 2020
      • But that needs to be monitored
    • The bulletin boards are dead from this
  • Viemed ($VMD.to)
    • Released details of a recent Non-invasive vent study
      • Study was led by their CMO
      • Data was between 2012 and 2018
      • Seems like a good validation of NI vents and a helpful data point to bring to the table
  • Sylogist ($SYZ.to)
    • CI purchased shares
      • Bought 1.032 shares since Nov 10, 2020
      • About 40% of trading volume
      • These likely happened at the start of December as there was a spike in volume
    • New CTIO announced
      • Pedigree seems well
      • 225 options at $11.78
        • 5 year term that vest in equal tranches on 1st, 2nd, 3rd anniversary of $15, $17 and $19
  • McCoy Global ($MCB.to)
    • New board member announced (Cory Janssen)
      • Was co-founder of Investopedia
      • He’s quite connected as McCoy commercializes some of their digital products
  • Freshii ($FRII.to)
    • Alternative Monthly Report stating that Silver Ring Value Partners Fund LP
      • During the month ended December 31, 2020, Silver Ring acquired 195,500 Common Shares through open market purchases on the facilities of the Exchange, resulting in Silver Ring holding an aggregate of 2,806,233 Common Shares as at December 31, 2020, representing approximately 10.65% of the issued and outstanding Common Shares.1 Prior to December 1, 2020, Silver Ring owned, or exercised control or direction over, 2,618,733 Common Shares, representing approximately 9.95% of the issued and outstanding Common Shares.
      • Seems like a decent value shop
      • Nice to have a capital allocator own a large amount of the shares outstanding
    • Update on Special Meeting Circular announced
      • Reason for the special meeting is to reduce the stated value of the A shares so they can institute a NCIB
      • This is a step in the right direction
  • Richardson Electronics ($RELL)
    • Reported fiscal Q2
      • Results were better than expected and guidance was strong
      • Looks like wafer side of their business is rebounding and the current cycle could match or eclipse previous cycle
      • The CT tubes are seeing an increase in demand versus what was previously communicated, particularly seeing strength in Europe
        • looks like they could get the healthcare part of the business to break even closer than anticipated
      • shares spiked 20% on the news
  • Martello Technologies Group Inc ($MTLO.v)
    • Provided an update on operations
      • GSX (which was acquired in May 2020) is now fully integrated
        • Gizmo coupled with solutions MTLO already provides is set to take their DEM strategy to another level
        • Sales from all GSX and Savision were about 58% of rev in Q2 fiscal 21
      • Reiterated that legacy products have been declining and will mask core business growth
        • They noted that expenses related to managing the legacy part of the business are minimal
  • Dawson Geophysical – ($DWSN)
    • Wilks Family disclosed a passive stake of 2.28mil shares or 9.7% of the outstanding shares

2 Comments

Filed under Company Updates, Random Thoughts

Martello Technologies Group – $MTLO.v

I’ve been writing lots about more traditional and statistical investment opportunities. I think it’s important to be flexible to some degree with your portfolio. I will never be the investor who buys a business at 20x revenue, but I’m not against buying one that has not earned a profit, is growing fast, and isn’t cheap or traditional.

Martello is an interesting example. I recently picked up some shares. It’s still a small position at this point, but that can change.

Background (pasted from TIKR.com)

Martello Technologies Group Inc. develops and sells products and solutions that optimize the performance of real-time applications on cloud and enterprise networks. The company operates through three segments: Performance Analytics, Network Performance Management, and IT Visualization. Its products include unified communications (UC) performance management software, IT systems visualization software, and software-defined wide area network (SD-WAN) technologies. The company also offers Martello iQ, a service monitoring and analytics platform; ATLAS, a SD-WAN solution with security, optimization, virtual private network, and failover components; and Martello Vantage suite of products to prevent, detect, troubleshoot, and address UC performance problems, such as delay, jitter, packet loss, and poor voice quality. In addition, it offers subscription and perpetual software licensing, maintenance and support, and training and professional services, as well as hardware products, cloud connectors, and virtual LBX devices. The company serves education, hospitality, healthcare, and professional service industries, as well as enterprise networks, remote works, and service providers. It operates in Canada, the United States, Europe, Asia, the Latin America, Australia, and internationally. Martello Technologies Group Inc. is headquartered in Ottawa, Canada.

We’ve all experienced some disruptions with some virtual meetings regardless of the platform used. Digital Experience Monitoring helps businesses take a proactive approach to cloud based collaboration and productivity.

Their website has some useful information on the topic.

The company has integrated with Mitel very well and should see revenue increase if there is an increase in Mitel’s business. Mitel has sales over 1 billion and over 4,000 employees.

Financials

As you can see they just hit EBITDA break even last quarter if you adjust for some one-time expenses.

Management

The C-suite seems fairly stacked for a company of this size.

The CEO has been on BNN a few times and always seems quite measured. He also did a TEDx Talk that I think is worth a listen. He has a background in the military and experience in Cyber Security.

The CFO recently won an award and well qualified given all the capital allocation decisions in front of the company at this growth stage.

The remainder of the team has deep experience in product development, talent acquisition, marketing, among other things.

Management owns about 3% of the company. I wish it was a little more.

Board

Similar to the executive team, the board has characteristics of a much larger company.

Sir Terry Matthews is on the board as co-chair. He cofounded Mitel and is obviously well connected. He owns about 15% of the common shares.

The other co-chair is Bruce Linton of Canopy Growth Group. Canadian retail investors will be familiar with him.

The co-founder of Martello (Niall Gallagher) is also on the board as well.

The board owns about 20% of the outstanding shares with 15% coming from Matthews. The board does not give me the impression that they are simply rent seeking buddies of the executive team, which is really nice to see.

The audit and compensation committee are comprised of independent directors.

Execution to date

The company has been focused on building recurring revenue through organic growth and through acquisitions.

Of course, the acquisitions have come with increased recurring revenue and it’s likely too early to judge if the prices paid were too high or at a fair price.

Risks

  • capital raise could happen to accelerate M&A activity
  • poor outcome from a deal
  • low insider ownership
  • share count is over 200mil, I usually prefer businesses with less outstanding shares
  • retail shareholder base can lead to volatile gyrations in the share price
  • increase in expenses as the economy reopens could be quicker than revenue growth

Milestones

Some milestones I can identify that would bring me more confidence in their execution and encourage me to add to my position:

  • several quarters of positive EBITDA
  • full integration of GSX (acquired in early 2020)
  • insider buying
  • another acquisition
  • getting MRR (monthly recurring revenue) growing organically

The shirt….

In July of 2019, Bruce Linton appeared on BNN to discuss being terminated as co-CEO of Canopy Growth. He was wearing a Martello Technologies and the shares took off from 0.20 to over 0.70. Now I don’t know what his intentions were by wearing the shirt, and I’m not going to speculate. The CEO appeared shortly after to discuss the business. I think John Proctor did a good job explaining the business and managing expectations.

I think this goes to show how primitive the venture market is. Linton was in the filings for Martello for about a year. If you type $MTLO into the search bar in Twitter you get some interesting comments around this time. Hopefully, the shareholder base is a little more focused on the business not the share price now, but who knows.

Conclusion

I think MTLO is a decent bet at today’s price. There seems to be some stability in the investor base after the run-up (and subsequent run-down) in 2019. The business seems to be building a base of recurring revenue while having a service that should be in demand for the foreseeable future. Monitoring the business performance is critical at this stage in their life and risk management via position sizing is my strategy.

Anyone else own MTLO?

Thanks,

Dean

*The author is long MTLO at time of writing. Thanks Chip and Liam for sharing notes.

6 Comments

Filed under Company Analysis