Is the Volpara Health Technologies Ltd (ASX: VHT) share price a buy after announcing its second quarter cash flow report?
Volpara describes itself as a ‘MedTech Software as a Service’ company that was founded in 2009 on research conducted at Oxford University. Its software is used for screening clinics to provide feedback on breast density, compression, dose and quality. Its VolparaEnterprise business provides role-specific dashboards and wide-ranging benchmarking analytics to help clinics manage their business more efficiently.
Is The Volpara Share Price A Buy?
Volpara reported that its group cash receipts for the second quarter of FY20 grew by 190% to NZ$4.9 million compared to the prior corresponding period.
The company holds no debt and at the end of the second quarter it had NZ$40.2 million compared to NZ$39.9 million at the end of the last quarter.
Cash outgoings of NZ$4.2 million in the quarter were offset by net $NZ$4.5 million received from the retail part of the June capital raising.
Volpara said that there was a one-off payroll timing adjustment relating to employees. Apart from that, management said costs are running at or below budget.
Group annual recurring revenue (ARR) was NZ$15.7 million, reflecting growth from both Volpara and MRS. The ARR comprised NZ$14.9 million from breast cancer software and NZ$800,000 from lung cancer software.
The company said it’s on track to meet its mid-range ARR forecast of NZ$17.1 million and it’s also on track to meet its forecast of 27% of US women having a group product applied on their images and data, which means Volpara can upsell its suite of products.
The average revenue per user (ARPU) by women under contract within breast cancer operations increased from NZ$1.37 in the first quarter to NZ$1.41 in the second quarter. Once MRS’ product suite switches to a ‘software as a service’ model it should leave to a good increase of ARPU.
Volpara CEO Dr Ralph Highnam said: “The positive results for the quarter are particularly pleasing, given that Q2 is traditionally our weakest quarter for sales and we were also integrating MRS, which we acquired late in the prior quarter.”
Volpara is certainly one of them more impressive small cap businesses on the ASX. No debt and rapidly rising revenue at high margin is very attractive. But it has also been a big performer over the past couple of years. There’s a lot of growth potential for Volpara with potentially higher ARPU, lung cancer growth and long term geographical expansion.
I’d be happy to make it a small part of my portfolio, but I’d prefer to buy the rapidly growing businesses in the free report below.
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