MNF Group reported impressive profit growth for the first half of FY21 despite the lack of a significant increase in revenue, posting a 10% increase in gross margin to nearly $50 million.
In the company’s latest ASX release, MNF announced EBITDA of $19.6 million, an increase of 16% year-on-year, with net income after tax of $8.4 million, an increase of 30 %.
As part of a strategic review of its direct business, MNF spun off from Pennytel, selling the subsidiary to one of its national wholesale customers, Macarthur Telecom.
“The agreement allows MNF to continue to realize the benefits of the Pennytel business through an ongoing agreement with Macarthur Telecom to continue to grow MNF’s wholesale activation service customer base,” according to MNF Group.
The earnings announcement follows MNF subsidiary Symbio’s decision to migrate its existing and future supply agreement to Superloop’s wholesale aggregation services in a $25 million deal.
The increase in the company’s profit margin is due in large part to the considerable increase in MNF’s recurring revenue, which is reflected in its record 1 million new phone numbers over the previous year, bringing its total to more than 5 million.
Its total recurring revenue increased by 15% HoH. This includes 55% growth in HoH and 87% growth in global wholesale recurring revenue margin.
“Our growth strategy is based on a laser focus on recurring revenue growth. We were particularly pleased with the performance of our global wholesale business, where recurring revenue increased by 55%. Our top 10 customers are spending more with us, as evidenced by our net revenue retention rate of 115%,” said MNF Group Managing Director Rene Sugo.
MNF is currently implementing its global expansion plans beyond Australia and New Zealand, starting in Southeast Asia and moving into the broader Asia-Pacific market. .
It has completed trials of its new Singapore network and expects to have its first customers onboarded by the fourth quarter of FY21. The report says there are six more Southeast Asian countries who are on the shortlist for the next stage of expansion.
The company increased its cash flow with $22.2 million in free cash and $30 million in unused debt, which the report says makes it “well positioned to support future acquisitions.”
The restrictions in place due to the pandemic have not only increased the demand for cloud communication services, but have also reduced travel costs, marketing events and corporate office expenses.
“While we have seen lasting positive effects on the business due to the changing nature of communications, the significant reduction in international travel continues to impact MNF’s global roaming business and Domestic small business spending remains subdued,” Sugo said.
“This offsets the strong increases in our recurring revenue and has seen overall group revenue stagnate. Importantly, we view these as temporary headwinds and expect revenue growth to resume as international travel resumes and that confidence in the small business sector improves.”