Volpara Health Technologies: No surprises in the 4QFY19 result

About the author:

Scott Power
Author name:
By Scott Power
Job title:
Senior Analyst
Date posted:
01 May 2019, 12:07 PM
Sectors Covered:
Healthcare, Life Science and Technology

No surprises in the 4QFY19 result

Volpara Health Technologies (VHT) has released its 4QFY19 cashflow results and has finished the year strongly. The key highlights were:

  1. Annual Recurring Revenue (ARR) of NZ$6.63m – up from NZ$5.6m in the previous quarter;
  2. 7.1% of US women screened with VHT technology – slightly ahead of revised guidance;
  3. Total Contract Value (TCV) of NZ$15.8m up from NZ$10.6m in the previous quarter (15 new customers; total 128);
  4. average price per woman screened was US$2.17 which is lower than our forecast of US$2.50 but reflected signing higher volumes through larger clinics;
  5. a gross margin of 83% was consistent with prior periods; and
  6. cash receipts for the quarter were NZ$1.0m, net cash outflow was NZ$2.6m and VHT finished with cash reserves of NZ$14.4m.

FY20 guidance calls for 10%+ of US population screened – a key driver

Management has been conservative in providing FY20 guidance, calling for ARR of 50% to 80% higher than FY19, implying between NZ$10m and NZ$12m and for at least 10% of women in the US being screened with VHT's technology. We believe this guidance is readily achievable and we focus mainly on ARR growth and percentage of population screened. Other catalysts include:

  1. finalising the Memorandum of Understanding with ScreenPoint Medical (has approved image analysis technology) into a distribution agreement; and
  2. an update from the FDA for mandatory regulations for breast cancer screening that will include nation-wide reporting (expected 3QCY19).

Changes to forecasts – moderate screening assumption

We have made no changes to our FY19 forecasts. However, following the conference call post the results we have revised some modelling assumptions in subsequent periods:

  1. reduced average screened population in US to 8% (previously 9%) in FY20 and to 13% (previously 14%) in FY20/21 respectively;
  2. reduced our Europe and APAC market to 0% in FY20 and replacing it with US$0.4m of capital sales; and
  3. increased cost base by A$0.9m (mainly uplift in costs of goods sold).

Investment view

Following the changes to our DCF valuation, rolling the model forward and increasing terminal growth rate to 7.25% from 6.0%, we have increased our valuation and share price target (Morgans clients can login to view). The downside risk is slower-than-expected take-up of Volpara Enterprise™  due to internal clinic budgetary constraints.

Volpara Health Technologies (VHT) remains a key pick in the sector. 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 Morgans adviser or 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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