The Volpara Health Technologies Ltd (ASX: VHT) share price is on watch after delivering a promising FY23 half-year result.
If you haven’t heard of Volpara before, its goal is to save families from cancer with advanced screening and protocols, providing “detection and increasing prevention”, and empowering women to “demand personalised care”.
It operates in both the breast screening space and lung screening space.
Volpara’s HY23 result
Here are some of the main highlights from the result:
- Revenue from customers went up 37% to NZ$16.9 million, or 22% in constant currency terms
- Operating costs increased 3.4% to NZ$24 million
- The gross profit margin improved from 91.4% to 91.8% in HY22
- Normalised EBITDA (EBITDA explained) improved 33% to a loss of NZ$4.2 million
- Net loss after tax improved 38% to NZ$5.3 million
- Cash balance of NZ$11.6 million
The sales and marketing, and product research, development and engineering costs increased 15% and 25% respectively, largely as a result of increased headcount for most of the period combined with an unfavourable change in the foreign exchange rate.
Cost reductions as a result of the restructure that the company had previously announced will be realised in the second half of FY23.
During the half-year period, it signed its largest contract to date, with Radnet which is based in LA. Radnet is one of the largest providers of outpatient services in the US, operating across 351 imaging centres in seven states.
The volume-based agreement includes Volpara Analytics and Volpara Risk Pathways software – both cloud-deployed products that go live at the end of this year and next year.
Volpara also noted that it attained B Corp Certification, the company believes that profitable growth goes hand in hand with an “expanded commitment to transformative social and environmental change”.
Promising stats
The numbers I’m about to write about could suggest promising things are to come for the Volpara share price over time.
Management increased its revenue guidance from a range of NZ$31.5 million to NZ$33 million, up to a range of NZ$33.5 million to NZ$34.5 million for the full year. This new range implies growth of between 28% to 32%.
I was also very impressed to see that the company reported that 40.5% of US women that had a breast scan had at least one Volpara product applied on their images and data, up from around 34%.
Increased market share is promising for the company because not only does that imply an initial increase of revenue, but the ASX healthcare share could also end up seeing more of its products being used on those patients, leading to a higher average revenue per user (ARPU).
The stronger gross profit margin is also very encouraging. That says to me that it can keep edging higher, and that Volpara can become very profitable when it isn’t investing so much into development and marketing. But I do think that spending is worth it for long-term value creation.
Final thoughts on the Volpara share price
The company is rapidly working towards breakeven on an operating cashflow basis by the fourth quarter of FY24. Operating expenses for the rest of the year will “decrease by approximately NZ$3 million”.
It needs to look after its cash if it’s to avoid a costly capital raising at this lower share price.
The release of the FDA’s breast density legislation could be a very promising update. A rule could require all healthcare providers in the US to notify women whether they have dense breast tissue and to inform them of the additional screenings needed to detect breast cancer, and also require providers to inform women of the impact of breast density on their risk of developing breast cancer.
Volpara looks like it’s in a very promising space, so I think the healthcare business is worth investing in for the long-term.
