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Blog

Volpara Health Technologies

Scott Power

Quarterly report shows underlying strength

Volpara Health Technologies (VHT) released its 2QFY19 cashflow which was solid with 15 new SaaS customers signed up – bringing the total to 100 customers. The 2Q is typically a softer period due to the US summer, however the annual recurring revenue (ARR) continued to grow (up 6% on the previous quarter to NZ$4.8m) and total contract value (TCV) added was NZ$2.0m. Management noted the 3Q has started well with TCV of US$1.1m added during October and ARR now sits at NZ$5.1m. Net cash receipts were NZ$1.7m, net cash outflow was NZ$2.4m and cash reserves were NZ$20.2m.

FY19 guidance reconfirmed

Management reconfirmed its FY19 guidance of NZ$9.0m in ARR, which represents 9% of the women screened in the US (currently sitting at 5.6%). This is a key milestone we had been focusing on.

Although we have made no changes to our forecasts for FY19/20/21, we have moved our forecasts higher in FY22 (+11.9%) and in FY23 (+10.9%) after revising our price per screen assumption to US$4.00 from US$3.50. We anticipate that additional features will enable higher fees to be charged.

What caught our eye

There were a number of achievements that we see as potential value drivers:

  • Sales into Japan (three capital sales made, now 16 systems deployed) are gaining traction with VHT looking to sign up an original equipment manufacturer to accelerate sales.
  • A recent announcement from the FDA Commissioner noted a forthcoming update to the FDA mandatory regulations for breast cancer screening that will include breast density reporting.
  • The signing of the first public screening provider (BreastScreen Central, New Zealand) is likely to be the first of a number of other state/country based programs – trials are underway in the Netherlands, Norway, the UK and some Australian states.

Investment view

We have revised up our longer term forecast and revised down our Weighted Average Cost of Capital (WACC) to 11.76% (from 13.04%). As a result we have increased our DCF valuation and share price target (Morgans clients can login to view).

The key risk to our target price is a slower-than-expected take-up of VolparaEnterprise due to internal clinic budgetary constraints. VHT is one of our top picks in the sector and we retain our Add recommendation.

More information

Morgans clients can login to view our detailed report and upgraded 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.