Volpara
About the author:
- Author name:
- By Scott Power
- Job title:
- Senior Analyst
- Date posted:
- 07 March 2017, 12:47 PM
- Sectors Covered:
- Healthcare, Life Sciences
Sales update shows customers like the product
Volpara (VHT) has provided a business update noting that nine customers have now signed VolparaEnterprise™ software-as-a-service contracts. High profile customers include Stanford University Hospital and the University of Virginia Medical Centre. The Total Contract Value (TCV) signed so far in FY17 is NZ$3.4m (compared to NZ$2.5m in TCV for FY16). The TCV includes the total sum of capital sales, support agreements for those capital sales, and SaaS contracts.
The annual recurring revenue (SaaS revenue) expected to be recognised over the next 12 months currently sits at NZ$700k.
Accounting standard results in adjustments to forecast
The SaaS model incorporates an annual license fee and a fee for each breast screen. The accounting treatment under the standards (IFRS-15 – revenue from contracts with customers) requires revenue to be recognised over the life of the contract. As a result our current model will now be adjusted to account for the revenue in accordance with the IFRS-15 standard. We have reduced the recorded revenue for the 11 months to the 28 February 2017 to NZ$2.6m (from NZ$3.9m). This NZ$2.6m comprises NZ$0.4m in SaaS revenue, NZ$2.1m in capital/licensing revenue and NZ$0.1m in government grants. The recognition of lower revenue in the shorter term results in NPAT falling 13% in FY17, 13% in FY18 and 25% in FY19. Our key assumptions are US$3.00 per screen and market share increases in the US and the rest of the world generating screens of 1.1m in FY18 and 4.8m in FY19.
Catalysts to watch
Key upcoming catalysts include the launch of VolparaEnterprise™ in Europe, major breast conference participation in US and Australia and a visit to Australia by Dr Nancy Capello (a high profile spokesperson on breast density). Investors should also note that approximately 11m and 33m shares are out of escrow in late March and April respectively.
Investment view
Although our short term revenue forecasts have been reduced the longer term profitability increases, and as such our valuation and share price target remain unchanged. The main downside risk relates to a slower than expected transition across to SaaS. Share price weakness (in part driven by poor sentiment to the sector) has created an opportunity for investors with a higher risk profile to add to current positions or enter the stock at attractive levels.
We retain our Add recommendation.
More information
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Disclaimer(s): Analyst owns shares.
Morgans Corporate Limited was Lead Manager and Underwriter to the placement & rights issue for Volpara Limited and received fees in this regard.
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