Vonex rallies 15% following strong September quarter growth

By Trevor Hoey. Published at Nov 7, 2019, in Technology

Telecommunications innovator Vonex Limited (ASX:VN8) has recorded an outstanding quarter on quarter increase in user growth, as well as achieving promising levels of satisfaction in its retail business.

This news prompted significant interest in the company on Thursday morning with its shares up 15.8% to 11 cents in the first hour of trading.

Vonex has employed a new system of disclosure which shows a success metric that indicates the levels of annualised recurring revenue (ARR).

ARR excludes one-off sales revenue and does not factor in net churn as the business continues to deliver positive net growth in active users.

The chart below displays the consistent growth in ARR that Vonex has delivered as its retail and wholesale businesses have gained scale in in calendar year 2019.

Vonex has experienced consistent growth.
Vonex has experienced consistent growth.

Growth driven by SMEs moving to cloud based services

Discussing Vonex prospects of sustaining these high levels of growth, managing director Matthew Fahey said, ‘’The company is well-positioned to continue growing its ARR and expanding its base of higher margin, higher average revenue per user (ARPU) business, as strong demand continues from small and medium enterprises (SMEs) moving to cloud-based telco services.

‘’Vonex's recurring business model promotes stable revenue, maximises customer lifetime value and supports scalability.’’

The continued strong performance of the company’s Private Branch Exchange (PBX) business augurs well for the future.

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

The company has passed the 35,000 active PBX users milestone, having achieved significant growth in signed contracts.

Achieving this milestone reflects the company's strong start to the December quarter of fiscal 2020, signing Total Contract Value (TCV) of new customer sales worth more than $500,000 in October 2019, an increase of 65% compared to October 2018.

TCV of provisioned customers is calculated using the minimum monthly commitment multiplied by the contract length and is typically realised over a period of between two and three years.

Vonex plans to deliver continued growth in TCV in fiscal 2020 as a mix of upfront and recurring revenue as it meets healthy demand from SME customers.

Customer satisfaction important in transitioning to NBN

Management is buoyed by the high levels of customer satisfaction being achieved with Fahey saying, ‘’Enhancing the customer experience is increasingly critical as the migration of customers to services delivered over the National Broadband Network (NBN) reaches its peak.’’

The Telecommunications Industry Ombudsman (TIO) recently reported a total of 32,801 complaints relating to the provision of Australian phone and internet services in September quarter of fiscal 2020, an increase of more than 6% compared to September quarter of 2019.

Management noted that Vonex received zero TIO complaints from customers in September quarter of fiscal 2020.

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