Vonex achieves 25% increase in contract value

By Trevor Hoey. Published at Oct 10, 2019, in Technology

The release by Vonex Ltd (ASX:VN8) of excellent September quarter numbers has resulted in its shares being well supported in the first half hour of trading, up more than 7% on yesterday’s close.

The telecommunications innovator noted promising marketing and sales progress across its retail and wholesale businesses, having recently surpassed 33,000 registered active subscribers to its cloud-based phone system (PBX) platform.

The combined impact is that Vonex’s revenues are experiencing strong growth with management highlighting that the company had added $1.6 million in new customer sales in the quarter, representing an increase of 25%.

A new digital marketing strategy has had an immediate impact, delivering a 29% increase in monthly leads generated from social media advertising campaigns, alongside a 6% reduction in marketing spend.

Registered users of these Private Branch Exchange (PBX) connections are a key indicator of business development progress as Vonex penetrates the multibillion-dollar Australian market for telco services to small and medium enterprises (SMEs).

The company has consistently grown this area of its business over the last four years as the following chart indicates.

Qantas Business Rewards makes strong contribution

In June, Vonex announced that it had entered a partnership as VoIP (voice over Internet protocol) and Hosted Phone System telecommunications provider to Australia’s largest business to business loyalty program, Qantas Business Rewards (QBR).

In the QBR program, small and medium enterprise (SME) members earn points not only when they fly with Qantas Airways Ltd (ASX:QAN), but also through their daily business expenditures with QBR’s select group of program partners which include the likes of American Express, Westpac, Caltex and Coca-Cola Amatil.

At the time, it was anticipated that the partnership would provide valuable marketing support to Vonex over the next 24 months, presenting significant growth opportunities for the company, particularly given SMEs are an important target market for the group.

This has come to fruition with QBR customers accounting for more than half of the new customers Vonex has attracted since the partnership was launched in mid-August.

QBR driving trend towards longer term contracts

The launch date is significant in that it indicates a September quarter contribution of only about six weeks, suggesting the December quarter numbers could be significantly higher, being the first full quarter contribution.

In addition to stimulating active user and revenue growth, the rewards alliance has improved the quality of Vonex’s book of business, attracting longer-term contracts of typically three years rather than two, and higher minimum spend commitments of typically $30 to $50 per user per month.

Similar to the positive impact of the QBR partnership, Vonex’s implementation of a revamped digital marketing strategy should continue to benefit the company in in the near to medium-term.

Underlining the prospects for ongoing growth, Vonex managing director Matt Fahey said, “We are pleased to see our key success metrics of user growth, new sales and total contract value all continuing to trend positively.

‘’This reflects the strength of our proposition to new and existing business customers, and reinforces the value of our alignment with Qantas, which presents significant ongoing growth potential.

‘’We are now reaping the benefits of having revitalised our marketing campaigns in recent months, and have built a solid platform for sustainable growth in our Retail business.”

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