MNF (ASX:MNF) share price rockets 17% on strong result and bold growth targets

Here's why this tech company's shares are soaring…

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The MNF Group Ltd (ASX: MNF) share price is rocketing higher on Tuesday following the release of its full year results.

In morning trade, the VoiP-focused technology company's shares jumped 17% to a multi-year high of $6.76.

MNF share price rockets after beating guidance

  • Recurring revenue increased 12% to $113.2 million
  • Recurring gross profit up 14% to $68.1 million (total gross profit $102.2 million)
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) up 13% to $43.1 million (guidance: $40 million to $43 million)
  • Underlying net profit after tax before amortisation up 16% to $19.2 million
  • Full year dividend of 7.6 cents per share, up 25% year on year
  • Balance sheet of over $100 million in cash and undrawn debt
  • Outlook: No guidance but growth in July
  • 2030 target of 100 million phone numbers

What happened in FY 2021 for MNF?

As you might have guessed from the MNF share price reaction today, the company was in fine form during FY 2021.

While its overall revenue declined 5% during the 12 months to $218.7 million due to lower global roaming and audio-conferencing usage, MNF continued to grow where it arguably matters most. Its high-quality recurring revenue increased 12% to $113.2 million and recurring gross profit lifted 14% to $68.1 million. The latter now makes up two-thirds of its gross profit, with management aiming to take this to 80% over the long term.

Key drivers of this growth were a 29% increase in phone numbers to 5.8 million and a Net Revenue Retention (NRR) rate across its top 10 customers of 115%. This means that its top 10 customers are not just staying on board, they are lifting their spending.

What did management say?

MNF's CEO, René Sugo, was rightfully pleased with the 12 months.

He said: "After a strong start to the year, I am pleased to report we have ended the 2021 financial year at the top end of market guidance, achieving solid performance across all metrics, including record EBITDA of $43.1 million and a 29% growth in phone numbers."

"I'm particularly proud of the progress we have made against our strategy during the year, as we build MNF into a world-class software company. We completed the divestment of parts of our Direct business, aligning our business to wholesale revenue and the multi-billion-dollar opportunity we see ahead of us."

What's next for MNF?

Following the divestment of its direct business, MNF is refreshing its strategy.

Mr Sugo explained: "MNF has refreshed its strategy for FY22 to focus on three areas to build MNF into a world-class software company. The new strategy seeks to simplify the business, build best in-class software capability and network, and scale and expand throughout Asia-Pacific both organically and through acquisition, driving short term revenue and margin growth and medium term EBITDA."

The CEO also revealed that the company has set itself a bold growth target over the remainder of the decade and aims to increase the phone numbers on its network significantly from 5.8 million currently.

"Enabled by the most experienced industry professionals, a strong culture and a genuine commitment to sustainability, MNF's refreshed strategy underpins its new strategic goal: to reach 100 million numbers on network by 2030," he added.

The company's expansion across the Asia-Pacific market is expected to be a key driver of this.

Mr Sugo commented: "Our new strategy will support MNF to achieve its new 2030 vision, and sets a clear path for global expansion, with the goal to reach 100 million numbers on our network by 2030. This will be achieved by increasing our market share and expanding our presence across Asia-Pacific. Singapore provides the stepping-stone into more opportunities in APAC. Now, supported by a strong balance sheet, we will further invest in our three business divisions, to capture further market share and expansion across the region."

This appears to have gone down well with investors, judging by the MNF share price performance today.

And while no guidance has been given for FY 2022, MNF revealed that it has started the new financial year positively.

"MNF continues to benefit from the increased utilisation of collaboration and communications software applications due to the COVID-19 pandemic. The business has had no immediate impact due to current lockdowns and July 2021 trading showed continued growth," he concluded.

The MNF share price is up 53% since the start of the year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended MNF Group Limited. 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.

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