Volpara Health Technologies Ltd (ASX:VHT) shares surge higher on strong quarterly update

The Volpara Health Technologies Ltd (ASX: VHT) share price has surged higher in morning trade following the release of its latest quarterly update.

At the time of writing the health technologies company’s shares are up 4% to $1.46.

What happened in the second quarter?

Volpara continued its strong form in the second quarter of FY 2019 and reported another record quarter for cash received from customers.

According to the release, the company saw cash received from customers jump 124% on the prior corresponding period to NZ$1.68 million. This took its Annual Recurring Revenue (ARR) to NZ$4.8 million, up 35% from the end of FY 2018.

This was driven partly by 15 new software-as-a-service (SaaS) deals for its VolparaEnterprise software, bringing the total number of SaaS deals since launch to 100.

In addition to this, the company has continued to win a greater share of the U.S. breast screening market and appears to be on track to achieve its target of a 9% share by the end of the financial year.

Management advised that the market share of VolparaEnterprise and VolparaDensity in the United States now stands at 5.6%, up from 3.7% at the end of the last quarter.

One slight disappointment, though, is that management has advised that the average price per woman (ARPU) in the US for its base VolparaEnterprise product remains “above US$2.50.” Whereas in the previous quarter it advised that its ARPU was “nearing US$3.00.”

Nevertheless, the company’s CEO, Dr Ralph Highnam, was very pleased with the company’s performance in what is traditionally a softer quarter.

He said: “Q2 is often tough due to the US summer, but I’m very happy with the quality of the orders we’ve brought in, the renewals, the licence expansions, the service contracts and our increasing footprint in Japan. Critically, we made our first foray into the public screening programs, which I’m certain other programs around the world will be noticing. Q3 has started very strongly, and we’re looking forward to getting to our big trade show, RSNA in Chicago, and finishing off the year very strongly, indeed”.

In respect to the third quarter, the company has had a record start to it, with over US$1.1 million of total contract value and an ARR now at NZ$5.1 million.

Should you invest?

I think that Volpara is one of the best small cap healthcare shares on the local market and a great buy and hold option.

However, its shares have run hard over the last 12 months and do trade at a significant premium to the market average. As a result, this does make them a high risk option.

So, if you’re looking for lower risk healthcare options then you might be better off with the likes of CSL Limited (ASX: CSL) and ResMed Inc. (ASX: RMD)

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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