Volpara: Coming into stronger quarters

About the author:

Scott Power
Author name:
By Scott Power
Job title:
Senior Analyst
Date posted:
19 November 2018, 12:19 PM
Sectors Covered:
Healthcare, Life Science and Technology

Key points

  • VHT posted its 1HFY19 result which was broadly in line with expectations.
  • Importantly the target of having 9% of US women screened using the Volpara product by March 2019 has been reconfirmed.
  • VHT noted on the conference call today that the next two quarters are traditionally the stronger periods. A major radiology conference in the US starting shortly is a key event to drive sales.

Delivering a solid performance

Volpara Health Technologies (VHT) posted a net loss of NZ$5.2m (previous corresponding period -NZ$4.2m). Revenue was NZ$2.7m (included annual recurring revenue (ARR) of NZ$2.1m, capital sales of NZ$0.3m and grant income of NZ$0.3m). Total contract revenue increased by 65% to NZ$6.5m and ARR was up 35% to NZ$4.8m with VHT now having 99 SaaS customers.

The gross margin was 71% and is expected to increase over time. Operating costs were NZ$7.6m consisting mainly of sales and marketing of NZ$3.4m (represented in part by additional US sales staff which increased to 15 from 11) and product development of NZ$2.1m. The cash position is solid at NZ$20.2m.

Target reconfirmed

Currently 5.4% or 2.2m women in the US are being screened are using VHT's product. The target of screening 9% of women in the US by March 2019 has been reconfirmed. A major radiology conference in the US starts shortly and is a strong source of leads with key decision makers from potential customers in attendance.

We are confident the target of 9% will be achieved and also note that the next two quarters are traditionally the stronger periods.

Catalysts to watch for

Key catalysts to focus on include:

  • A recent announcement from the FDA commissioner noted a forthcoming update to the FDA mandatory regulations for breast cancer screening that will include nation-wide breast density reporting.
  • Further public screening programs may be signed up with trials being done in Netherlands, Norway, UK and some Australian states.
  • The signing of an original equipment manufacturer in Japan to help accelerate sales.

Investment view

Given we have made no changes to forecasts, our DCF valuation and share price target are unchanged (Morgans clients can log in to view). The key risk to the target price is a slower-than-expected take-up of VolparaEnterpriseTM due to internal clinic budgetary constraints.

Volpara remains one of our key picks in the emerging healthcare space. We maintain our Add recommendation.

More information

Morgans clients can login to view our detailed report and share price target for Volpara Health Technologies (VHT). Alternatively, please contact your nearest Morgans office for access.

Disclaimer(s): Morgans Corporate Limited was a Joint Lead Manager to the placement and share purchase plan for Volpara Limited and received fees in this regard.

Analyst owns shares.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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