The Volpara Health Technologies Ltd (ASX: VHT) share price will be one to watch this morning after the release of its first quarter update this morning.
How did Volpara perform in the first quarter of FY 2020?
This morning the medical technology software-as-a-service company whose AI imaging algorithms assist the early detection of breast cancer revealed that it has had a positive start to the new financial year.
According to the release, Volpara achieved cash receipts of NZ$2.3 million in the first quarter, up 137% on the prior corresponding period. Volpara’s operations alone contributed NZ$1.7 million, up 72% year on year. The remainder was generated by MRS Systems customer receipts received in the 18 days post acquisition.
At the end of the period the company’s annual recurring revenue (ARR) increased to NZ$14.6 million. This comprised NZ$13.6 million from Breast sales and NZ$970,000 from Lung sales.
Management’s forecast for the year was for Volpara’s ARR to grow 50% to 80%, and for the newly acquired MRS business to generate a minimum of US$4.5 million in ARR. This would result in a mid-range group ARR forecast of US$11.5 million or NZ$17.1 million. Pleasingly, this strong first quarter means the company is well on track to achieve this target, especially given how group churn remains very low.
The release also advises that the company is on track to achieve its forecast of 27% of US women having a Volpara Group product contracted to be used on their images and data.
After careful analysis of customer lists from both Volpara and MRS, management estimates that the company now has paying customers covering ~25% of US women who are screened (~10M women).
Finally, the average revenue per user (ARPU) generated by women under contract across the group within Breast is approximately US$0.91. This covers women being screened under service & maintenance contracts for the MRS software only through to women benefitting from the full suite of Volpara programs.
Given typical Volpara ARPU to date, management pointed out that the company now has very significant up-sell opportunities as it moves towards selling the complete product suite to existing customers.
Looking ahead, the release advises that Volpara-alone has had a very strong start to the second quarter. It has received orders providing new ARR in July 2019 very close to the entire new ARR in the second quarter of last year.
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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 REDBUBBLE FPO and VOLPARA FPO NZ. 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.