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Vonex shares rise after achieving remarkable growth in recurring revenue

The company has increased its annualised recurring revenue by more than 85% during FY20, with the acquisition of 2SG Wholesale a major contributor to this growth.

Vonex Ltd (ASX:VN8) is seeing continued growth in annualised recurring revenue (ARR) underpinned by sustained sales momentum and well-executed mergers and acquisitions.

The ARR has increased more than 85% during financial year 2020 to $15.5+ million, up from prior expectations of $14 million.

Vonex shares are trading about 14% higher intra-day, at 12 cents.

Organic and inorganic growth

Following the completion of Vonex’s acquisition of 2SG Wholesale in March 2020, the combined business is delivering revenue growth which has exceeded internal budgeting.

2SG Wholesale is a telecommunications and data wholesaling business which provides Australian Managed Service Providers, ISPs and System Integrators with access to the latest in hardware and connectivity solutions from leading brands.

Substantial sales momentum achieved through successful marketing and partnership initiatives, as well as the smooth integration between the Vonex and 2SG businesses has helped drive the company’s ARR to more than $15.5 million.

This compares favourably to management’s expectations of $14 million in group ARR on completion of the 2SG Wholesale acquisition, which Vonex disclosed to the ASX on 29 November 2019.

The company sees significant scope to continue its growth, both organically and by way of further acquisition following its recent receipt of the first tranche of cash proceeds from the sale of non-core mining royalties.

Wholesale growth strategy

Vonex plans to expand its network through direct integration to National Broadband Network (NBN) points of interconnect in strategic national locations via 2SG Wholesale.

Building upon its existing points of interconnect, 2SG will add additional direct interconnects with NBN throughout FY20 and FY21.

2SG is responding to strong interest in the market by enabling a near-direct NBN relationship for key existing and new wholesale partners.

The first of these new direct points of interconnect will go live in Nambour, Queensland, in June 2020.

Vonex is currently considering additional sites which it expects to push live during Q1 of FY21.

Retail growth

Vonex’s retail operations continue to expand, with new customer additions running at elevated levels.

The company’s total contract value (TCV) of new customer sales in the month of April 2020 is up 66% year-on-year.

Vonex’s value proposition is resonating with its target market of Australian small and medium enterprises (SMEs), many of which have been attracted by Vonex’s ability to rapidly provision scalable cloud-based business phone systems.

Oper8tor

Vonex’s Oper8tor app is a patented aggregated communications platform targeting the inclusion of conference, voice, messaging and video functionality, facilitating user communication across different channels.

The app aims to seamlessly link all voice calls as well as messaging across multiple platforms and devices.

In addition to closed user group testing, v1.1 of the Oper8tor app is now available to test from the Apple and Google app stores.