Magor Corp.’s Aerus order backlog indicates strong 2015

It’s a quiet Saturday afternoon in November when most Ottawans are enjoying the weekend. But not Magor Corporation. The local company’s top brass is on the go.

“Working for a startup, there’s no such thing as weekdays and weekends,” says Paul Rusheleau, Magor’s senior marketing manager.

With fewer than 40 employees, the Kanata-based “video-collaboration vendor,” as Rusheleau refers to it, has entered the 2015 fiscal year hoping to take its flagship product to the next level.

Less than two years ago, Magor unveiled the result of its four-year effort aimed at drastically improving videoconferencing. Its work culminated in what the company dubbed “Aerus,” a software-based videoconferencing platform that breaks away from the traditional model’s scheduled event, similar to a conference call.

Unlike the hardware-based model offered by its major competitors, such as Cisco Systems, Inc. or Polycom, the Aerus cloud technology allows users to spontaneously enter or exit a call. They can also use video interactions for innovative sharing with one another, and an interface that allows users to simultaneously display information from their computer during a live call.

The capabilities “made us a different animal than any other videoconferencing solution in the market,” says Rusheleau.

Magor’s competitors haven’t taken too kindly to the new software, he says.

“If you take someone like Cisco or Polycom, they make tons of revenue off of hardware. They can’t just say, ‘Let’s just make all our stuff software now,’” Rusheleau says. “If they did that, they would lose a significant amount of revenue. So the big vendors in our space are trying to slow the transition down as much they can to protect their revenue. We can just run really fast.”

Magor’s Aerus rollout in 2013 came a few months after the company’s initial public offering on the Toronto Stock Exchange at 59 cents per share. The company’s stock price fell to 25 cents per share by early November 2013, but surged back to 49 cents following the Aerus rollout.

Since then, the company’s stock price has declined steadily, falling to approximately 19 cents per share.

“There’s more and more cloud solutions on the market today, so that’s not as unique to them as it was at one time,” says Zeus Kerravala, Massachusetts-based principal analyst at ZK Research and a longtime observer of the business video-communications market. “That’s an area that’s caught up to them. I would have liked to have seen them more aggressive with that earlier on because they did have somewhat of a lead.”

Kerravala says Magor needs to be more aggressive on the sales and marketing front if it is to compete in crowded market.

In late August, Magor reported its earnings for the 2014 fiscal year. While sales have improved from 2013 in large part thanks to Aerus—revenues rose to $2 million from $1.9 million in 2013—its net loss still totalled $6.4 million in 2014.

Being headquartered in Ottawa hasn’t helped, says Kerravala, pointing to the fact that so many tech companies manage to draw attention to themselves by virtue of their location in Silicon Valley.

“They’re pretty quiet. Even if I go to a lot of the trade shows in this industry, you don’t really see them have a presence there, but I think they need to,” he says. “There’s a lot of legacy vendors in the collaboration market and I think the industry’s due for a change, but while (Magor) has a good solution, it’s not going to be them that makes that change unless they’re more vocal about what they do and the value that they bring.”

Magor has seen some success both within Canada and across various international markets. Its major clients include law enforcement agencies in Canada and the U.S., as well as Middle Eastern governments. Operating on a pay-per-month-per-user basis, Rusheleau says that the company’s major focus right now is on larger enterprises in the sectors of healthcare, public safety, oil and gas, and education.

One of its clients, the Canadian Union of Postal Workers, has been impressed with Aerus. Rick Martel, CUPW’s director of information services, says Magor’s software was the most viable solution for its need to connect nine calling points across Canada (and sometime elsewhere around the world) by videoconference.

“It’s been a pretty good experience,” Martel says. “The equipment has performed about as well as we expected it to. It’s easy to learn, so there wasn’t a huge learning curve for our users.”

Despite a financial lag following Aerus’ release, there is some optimism for Magor in 2015. In its first quarterly earnings report for the 2015 fiscal year, released in late September, its net loss reached $1.7 million, roughly the same as the previous year for the given quarter, with a cash position of $2.8 million.

Its order backlog reached record numbers, rising 177 per cent to $657,000, compared to $237,000 at the end of 2014’s fourth quarter. The company projects that this will translate to strong numbers in later quarters of 2015.

“There’s a reason why we have the highest order backlog in history. We’re really looking forward to our next few quarters to follow that up,” says Rusheleau. “Backlog is backlog. It means that it’s going to be revenue at some point. We’re a startup — our numbers reflect that — however, we’re a five-year-old startup, which means we’ve got investors that have strong confidence in us, looking at a market that is continually projected to explode, and hasn’t yet.”

Rusheleau wouldn’t reveal any specific research and development the company is currently looking into, but says it’s likely Aerus will continue to evolve.

“Our user-client strategy is totally dependent on customer need, so we’re working with all of our customers to prioritize what to develop first,” he says. “In the coming years, we’ll become much more successful financially, and we’ll be able to ramp up the resources to accelerate that.”

He says the key for Magor’s future could be in mobile platforms, where so many tech companies are currently focused.

“We believe that in 10 years, everyone’s going to be using video all the time in the way that, in 1990, you wouldn’t have imagined that in 2000 everyone would be walking down the road looking at their smartphones and not at buildings or people around them,” Rusheleau says. “We really think we’re going to be a be a big part of that and become a leader in specific industries to do that.”