Thank you for standing by. This is the conference operator. Welcome to the Martello Technologies Group Q1 Fiscal 2024 Investor Conference Call. Today's call will provide Information and Commentary on Financial Results for the three months ended June 30, 2023. We will hear from John Proctor, President and CEO of Martello, and Jim Clark, Chief Financial Officer. Following these remarks, John and Jim will take questions. If you have questions following the call, you can reach Martello at investor@martellotech.com. First, here are a couple of housekeeping notices. All participants are in listen-only mode for the duration of the call. After the presentation, there'll be the opportunity to ask questions. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star and zero.
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'll begin with Martello's CEO, John Proctor. John?
Thank you. Good morning, everyone, thank you for joining us today. Before Jim and I review the Q1 of the financial year, I'd like to highlight the impact of actions we've taken to manage cash as we grow the Vantage DX business against the headwinds of legacy product revenue declines. We have discharged our Vistara debt in full and refinanced the remaining balance with Wesley Clover International, which is the investment firm owned by Martello's Chairman, Terry Matthews. Terry's confidence in us is strong. He extended the maturity date of our Debt to 2026 to give us more runway to develop Vantage DX, while Legacy Product Revenue fully sunsets. Our operating expenses have dropped by 15%, and we've seen a 69% improvement in our adjusted EBITDA loss in Q1.
This is the result of the cost optimization exercise we undertook in fiscal 2023 and ongoing monitoring and optimization of that spend. Now, I'll talk about Martello's business in Q1. You'll recall that Martello is made up of three distinct business lines in very different stages of growth. The Vantage DX, Microsoft Teams, and 365 Monitoring Platform, which is launched in 2021. That's the first line, and we are focused on developing the market for this software and have now more than 1 million users on board so far. The second is a stable Mitel Performance Analytics Business. The software we provide to Mitel customers continues to generate a high margin, recurring revenue base. The third is creating a headwind for Martello of top-line revenue, our Sunsetting Legacy Products, which by Design, are declining.
We are actively pursuing the best fit to retain certain legacy customers on existing or new products. The end of Q1 for Martello marked the start of a new fiscal year for Microsoft, and we are very aligned with their strategy. Microsoft has placed a focus on Flexible Work with initiatives, initiatives like Teams Phones, Operator Connect Mobile, taking center stage. They are also increasingly driving transactions through their marketplace. Vantage DX is a Microsoft preferred solution on their Azure Marketplace. As a result, we've seen an uptick in Microsoft contacts reaching out to us in Q1. In that quarter, we added 45% more Microsoft contacts to our database than in the previous quarter, as Microsoft sellers reached out with potential sales opportunities. Our partner strategy is similarly well aligned to Microsoft's Strategy.
I mentioned on Martello's last earning calls that we would be onboarding a new partner. I'm pleased to share and announce that CGI, an IT and business consulting firm, has become Martello's partner. They are using Vantage DX as part of their Microsoft 365 managed service offering and in their consulting practice. This allows them to diagnose Microsoft 365 and Teams issues for their large customer base more efficiently. Our partnership with Microsoft Operator Connect partner, Orange Business Services or OBS, has expanded to include a managed service offering. OBS has recently spoken about their collaboration and employee experience strategy and identified Vantage DX as a Key component. Richard Heaps, the Head of Collaboration for Product Management at OBS, was quoted as saying that, "Tools such as Vantage DX are becoming more and more essential because employees today need the best tools and the best experience.
If they don't get that, they'll go and work somewhere else, somewhere else. In his view, when you add Vantage DX to a team's deployment, you can troubleshoot more efficiently across the whole path. It gives OBS greater visibility compared to the tools that come natively with Microsoft or other vendors. At the same time, Teams Phone Mobile is heating up with increased focus by Microsoft as part of its Flexible Work Initiative. Operator Connect Partners are looking at this, and there is interest in ensuring the reliability to hand over between fixed and wireless on these calls. Vantage DX can help address this issue for Operator Connect partners moving into Teams Phone Mobile, while also providing greater visibility into whole Teams calling path for better troubleshooting. We're seeing more conversations with Operator Connect partners as a result.
Q1 was an eventful, eventful quarter in our Mitel business as we launched an important new release of MPA that supports soft phone and voice quality monitoring, which is critical to Mitel's hybrid workplace strategy. We hit the road to Mitel's Major Partner Events in Q1, demonstrating these capabilities to Mitel's leading partners globally and connecting with key Mitel executives. Finally, at this section, I'm exceptionally pleased that after diligently repaying our Vistara Debt over the last few years, as I mentioned earlier, we were able to discharge the remaining amount in full subsequent to Q1, refinancing this debt with Wesley Clover through our Chairman, Terry Matthews, who agreed to extend the maturity date to 2026. We thank both Vistara and Terry for their unwavering faith in us. This refinancing has given us runway to grow the Vantage DX business while managing this decline of Legacy Products.
Our team is very focused on driving Vantage DX MRR growth through the acceleration of direct and indirect channel sales, as well as the retention and expansion of existing clients. I'll speak more about this in a few minutes when I close with my perspective on Martello's outlook. For now, I will hand over to Jim to provide a more detailed review of our financial performance in the Q1 of the fiscal 2024 year. Jim, over to you.
Thanks, John. Good morning, everyone, and thanks for joining. Before I discuss the financial results from the Q1 of Fiscal 2024, I'd like to share my perspective on the company's performance. Our annual operating plan prioritizes net new Vantage DX revenue growth, both through direct sales and channel partners, including Microsoft, Orange Business Services, and CGI. With more than 1 million users already on Vantage DX and Microsoft recommending the platform to its customers and partners, we continue to lay the foundation to grow market share. At the same time, we continue to manage the headwinds of legacy decline, impacting top-line revenue. I am pleased to have recently discharged our debt obligations to Vistara and refinance with Wesley Clover International, with repayment extended to August 28, 2026.
This gives us greater runway to develop the Vantage DX business alongside Microsoft and other partners, while closely managing the legacy product decline. Let's move into the financial discussion. As always, we've posted our financial results and the related press release to SEDAR, where you can review them in more detail at your convenience. For Q1, revenue was CAD 4 million, representing a 4.2% decrease compared to Q1 of fiscal 2023. Vantage DX revenue grew year-over-year, and Mitel revenue remained stable, sunsetting legacy product revenue declined by 25%, causing the net decline in revenue. Vantage DX is Martello's key modern workplace optimization business.
In Q1 of fiscal 2024, Vantage DX monthly recurring revenue grew by 232% compared to Q1 of fiscal 2023, both from net new clients and the conversion of clients from legacy products to the Vantage DX solution. There were more than 1 million Microsoft users monitored by this Microsoft-recommended platform. Total Vantage DX revenue in Q1 of Fiscal 2024 was $0.51 million, compared to $0.15 million in Q1 of the prior year. Sunsetting legacy product revenue declined by 25% or $0.57 million year-over-year. The ongoing decline of legacy product revenue is proceeding as planned. The company is executing a strategy to convert certain legacy customers to the Vantage DX platform. The Mitel business line remains a stable and profitable source of recurring revenue and cash.
Revenue in this segment was stable in Q1 of fiscal 2024, with marginal favorability from currency conversion. The Mitel business line represented 45% of total revenues in Q1 of fiscal 2024. That compares to 42% in Q1 of fiscal 2023. Revenue was 99% recurring in Q1 of fiscal 2024, compared to 99% in Q1 of fiscal 2023. Gross margin as a percentage of revenue, was 88% in Q1 of fiscal 2024, compared to 89% in Q1 of fiscal 2023. The marginal decrease is due to the increased cost of Inventory related to higher Mitel hardware sales and an increase in third-party software subscription resale in Q1 of fiscal 2024, compared to the same period of 2023.
This is partially offset by lower hosting costs in Q1 of fiscal 2024, compared to Q1 of the prior year. Monthly recurring revenue was $1.31 million in Q1 of fiscal 2024, compared to $1.38 million in the prior year. A 3% decrease. That is again, attributable to declining subscriptions and related maintenance and support on sunsetting legacy products. MRR is a non-IFRS measure, and it represents the average monthly recurring revenues earned in a fiscal quarter. I'm pleased to report that the cost optimization exercise undertaken by management in Q2 of fiscal 2023, has resulted in a 15% decrease in our operating expenses, bringing them down to $4.29 million in Q1 of fiscal 2024. The cost optimization exercise included headcount reductions combined with Lower Vendor spend.
As management, we continue to closely monitor and optimize our spend. The net loss of CAD 1.21 million in Q1 of fiscal 2024, represented a 2% improvement compared to the net loss of CAD 1.23 million in Q1 of fiscal 2023. Importantly, though, when we exclude the accounting entry for the fair value of the FedDev loan, the improvement in net loss is 47%. Adjusted earnings before interest, taxes, depreciation, and amortization, loss improved by 69% to CAD 0.2 million in Q1 of Fiscal 2024, compared to CAD 0.65 million in Q1 of fiscal 2023. Again, this is attributable to the cost optimization exercise I've already discussed. Just as a reminder, adjusted EBITDA is also a non-IFRS measure.
Martello's cash and short-term investments balance was $3.73 million as of June 30th, compared to $2.2 million at March 31st. The post Q1 equity raise and debt refinancing has significantly improved our working capital. To close, execution of our annual operating plan will result in net accretive growth, with Vantage DX firmly positioning itself as the market leader out-of-the-box Microsoft tools performance monitoring SaaS solution. Martello's MPA solution, coupled with growing interest from Mitel and Mitel partners in Vantage DX, make this segment an exciting growth opportunity. The additional runway provided by the extension of our primary debt to 2026, together with the cost optimization steps we took in fiscal 2023, will allow us to execute on our Annual Operating Plan and move towards Positive Adjusted EBITDA.
I will now hand it back to John to close with his perspective on Martello's outlook. John?
Thanks, Jim. As I mentioned earlier, our focus is to grow Vantage DX MRR while retaining and expanding as many legacy customers as we can. In this, our partnerships with CGI, Microsoft and Orange will be key. We have developing sales opportunity pipelines with all of these partners. I'm very confident that we're in the right market at the right time. Microsoft Teams is a large and growing market of 300 million users. IT teams globally are facing escalating pressure to manage Teams performance for a mix of remote and office-based users. We've looked at some aggregating monitoring data coming out of Vantage DX. We found that on average, 3% of Teams calls fail or are poor quality due to problems in the IT Infrastructure Supporting Teams.
What's interesting is that more than 60% of the issues disrupting Teams calls are within the organization's control. If you know where they are, you can fix them. Vantage DX tells you when and where the problems are happening, so you can fix them. 3% actually isn't insignificant. In a 5,000 employee organization, and to note here, our biggest client is 400,000 users, so you can scale that up. But in a 5,000 employee organization, it means 3,500 bad calls each month. 3,500x that a customer couldn't access your support team, or your sales team couldn't easily demo your product to a prospect. There is a real financial impact to a company's productivity and customer experience when you have call failure.
I also see some opportunities for upside in the medium term. I've spoken about Teams Phone Mobile and our promotion to top-tier partner status, and that's another important driver of upside. It places us in a much smaller group of partners with access to joint marketing activities, and more importantly, it provides Microsoft sellers with a higher incentive to sell our product to their customers. We're doing everything we can to increase the velocity of our Vantage DX sales cycle. We introduced a lighter trial to reduce the time each prospect spends evaluating the product and introduce paid professional services for those who require extended trials. We're pursuing targeted account-based demand generation strategies to drive more prospects into our Pipeline.
The headwinds I see for Revenue Growth in the near term are legacy product revenue decline, which we know is distorting the top line, as well as the challenges many, many in the tech industry are facing today with enterprise software sales. Sales cycles are longer, there are more checkpoints in every sale than ever before, and large enterprises have increasingly robust evaluation processes, including security reviews, which consume time and resources in the sales cycle. We are mitigating these factors in several ways to ensure our sales cycle is as efficient as possible. Mitel continues to be a strong and valued partner, and we do see upside in this channel in the future, particularly as they expand their install base with the Unify acquisition due shorter, later this year.
We remain laser-focused on growing Vantage DX MRR by executing on our Microsoft and channel, and channel strategy, as I've discussed, targeting key legacy customers for conversion to Vantage DX, maintaining a regular Cadence of product innovation, and continuing to build a pipeline of direct sales opportunities, and also streamlining our sales process to accelerate time to revenue. We are appropriately resourced today to achieve these objectives, and we'll continue the disciplined cash management that Jim has spoken about earlier. Jim and I are here now to answer your questions. Operator, would you please facilitate the Q&A part of this call?
Certainly. We will now begin the question-and-answer session. Investors and analysts who wish to join the question queue may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw from the question queue, please press star, then two. Anyone on the Conference Call who wishes to ask a question may press star, then one now. This concludes the question-and-answer session. I would like to turn the conference back over to John Proctor for any closing remarks.
Thanks, Ariel. Just a couple of bullets. First of all, the CGI becoming a partner is exciting. As I've sort of discussed before on these calls, when you start moving into partners, it creates a barrier to entry to anybody else to move on. There's a, there's a cost for anybody from Orange to Microsoft to CGI onboarding a Partner. Once you have become the tool of choice inside that environment, it's a barrier for anybody else to move in on that space. We're quite very pleased with CGI becoming a partner. We're now currently onboarding them. There are opportunities in the Pipeline we're talking to them about. That is very good news. Of course, you know, we're discussing that for the first time on this call.
More news obviously will follow on that as we progress the relationship. At the same time, Rogers is now a partner. That one is progressing as well. Certainly from a Canadian perspective, CGI and Rogers means we're starting to progress definitely in that space with their partners. Rogers has been a very early adopter of Microsoft Operator Connect. That also, you know, talks about the expansion of that environment that I mentioned earlier. There's some good news on that space. You know, particularly now, as we talked about the financing, we're keeping the cash in the company as much as we can. We're tracking steadily towards EBITDA positive, and then from there, we'll, we'll leapfrog our way onto cash flow positive. These are all good news stories.
Then MRR, yes, we've got some headwinds and certainly the legacy decaying. As we've mentioned before, that is the plan. We always knew the legacy was going to decay. We accept that, the growth then, and as the the top line, this Vantage DX, as that grows, that growth will outbalance the legacy decline. That's clearly the tipping point, as we go through. As Jim mentioned, we're very conscious of cash flow, we're conscious of costs, so we're keeping those very tight, as we progress this path towards being cash flow positive. That's, that's key for the foreseeable future. Thank you all for your attendance. Thank you for your interest in Martello. The recording of today's call will be available on our website later today.
If you do have any follow-on questions, you can reach out to our investor relations anytime by emailing, investor@martellotech.com. Thank you all for attendance. Back to you, Ariel.
This concludes today's Conference Call. You may disconnect your lines. Thank you for participating, and have a pleasant day!