Application is single tenant so users must be in the same directory as the home tenant
https://docs.microsoft.com/en-us/azure/active-directory/develop/single-and-multi-tenant-apps Azure AD entitlement management uses Azure AD business-to-business (B2B) to share access so you can collaborate with people outside your organization. With Azure AD B2B, external users authenticate to their home directory, but have a representation in your directory.
https://docs.microsoft.com/en-us/azure/active-directory/governance/entitlement-management-external-users