Facing an issue setting up MFA authentication for external guest users in an Azure - External Tenant

Question

I am facing an issue setting up MFA authentication for external guest users in an Azure External Tenant. Here is the infrastructure setup I have configured in the external tenant:

1. Created an application with supported account type (Accounts in any organizational directory (Any Microsoft Entra ID tenant - Multitenant) and personal Microsoft accounts (e.g. Skype, Xbox))
2. Created a group.
3. Set up a Conditional Access (CA) policy with the following configurations:
   • Under "Assignments," selected the group created in step 2.
   • Selected the target resource, which is the application created in step 1.
   • In "Access Control" -> "Grant" -> "Grant Access," I selected "Require multifactor authentication" and saved the policy.
4. Made changes under Security settings:
   • Navigated to "Security" -> "Authentication Methods" -> "Email OTP" and selected the group from step 2.
5. Invited guest users

1. Added the invited guest users to the group created in step 2.
2. Created a user flow under "External Identities" and linked it to the application created in step 1.

Problem:

When running the user flow for the first time, it prompts for the email and password, then sends an OTP to the email (for MFA - the screen appears as given in Image 1 below). After entering the code, the user is authenticated successfully. However, when rerunning the same user flow for the same user, after providing the username and password, I receive an OTP, enter it, and then get another OTP in a continuous loop(for MFA - the screen appears as given in Image 2 below).

This issue does not occur when using the same flow with a locally created account in the external tenant. Has anyone encountered this issue or found a solution? Any assistance would be appreciated.

Image 1:

Image 2: