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Why the MNF Group (ASX:MNF) share price is jumping 7% higher today

The MNF Group Ltd (ASX:MNF) share price is jumping higher today after the release of a strong half year result this morning…
The post Why the MNF Group (ASX:MNF) share price is jumping 7% higher today appeared first on The Motley Fool Australia. –

High

In morning trade the MNF Group Ltd (ASX: MNF) share price has been a strong performer following its half year results release.

At the time of writing, the leading voice communications software provider’s shares are up 7% to $4.48.

How did MNF perform in the first half?

MNF continued its positive form during the first half of FY 2021 and delivered strong recurring revenue and profit growth.

For the six months ended 31 December, the company reported revenue of $112.1 million. While this was only up marginally on the prior corresponding period due to declines in global roaming and audio conferencing usage, recurring revenues continued to grow.

MNF delivered a 15% increase in recurring revenue to $55.7 million for the half. This was driven by its Wholesale business, which reported strong growth across both its Global and Domestic segments. This was supported by firm recurring revenues from the Direct business.

This means that recurring revenues now account for 50% of its overall revenue, which is up from 43% a year earlier.

Also growing at a solid rate during the half was its earnings before interest, tax, depreciation and amortisation (EBITDA). MNF reported a 16% lift in EBITDA to $19.6 million. This means it is on track to achieve its guidance for FY 2021.

On the bottom line, the company posted a 30% increase in underlying net profit after tax (before amortisation) to $8.4 million.

This solid profit growth allowed the MNF board to declare a fully franked interim dividend of 3.3 cents per share. This is up 32% on last year’s interim dividend.

Key metrics improving

Investors may want to take note of a few other key metrics which have also been improving during the half (and appear to be helping drive the MNF share price higher today).

This includes the number of phone numbers growing 24% to 5.1 million thanks to strong organic growth. The addition of over 1 million new numbers is a big positive, as traditionally it is a leading indicator of future recurring revenue.

Another metric that caught the eye was its Net Revenue Retention (NRR). The company revealed that its NRR rate across its top 10 customers was 115%. This means that the company is not only retaining these customers, they are also spending more.

MNF’s CEO, René Sugo, commented: “I am delighted to report a strong result across all key metrics, including record profitability, a 24% increase in phone numbers and 15% growth in recurring revenue. Underpinning our growth strategy is a laser focus on growing recurring revenue. We were particularly pleased with the performance of our global wholesale business, where recurring revenue increased 55%. Our top 10 clients are spending more with us as seen in our net revenue retention rate of 115%.”

Outlook

The company revealed that its expansion into Singapore is progressing well and technical trials are underway with three major global customers. MNF is aiming to go live in the market later this financial year.

But management may not stop there. It revealed that it has been completing due diligence to assess the next Asia-Pacific market to expand into. A number of milestones in this process have been completed with six possible target countries shortlisted.

It also notes that the COVID headwinds it is facing from lower roaming revenues should be temporary. It expects revenue growth from this side of the business to recover once international travel resumes.

For now, Mr Sugo believes the company is on track to achieve its FY 2021 EBITDA guidance of $40 million to $43 million.

Commenting on its outlook, he said: “We are on track to deliver EBITDA for the 2021 financial year of $40.0 million to $43.0 million.”

“Our strategic priorities are to grow market share, expand into the Asia Pacific region, be a trusted partner and provide a high standard of customer experience. We are very pleased with the progress we have made in Singapore which further cements our relationships with our global customers and give us confidence to expand further into the Asia Pacific region.”

“This milestone highlights the need for MNF’s services across the region and supports the steps we are taking to assess new markets in the region to grow and expand our footprint. We are well positioned to execute on these strategic initiatives and drive operational excellence at home, in Australia and New Zealand,” Mr Sugo concluded.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the MNF Group (ASX:MNF) share price is jumping 7% higher today appeared first on The Motley Fool Australia.

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