The Volpara Health Technologies Ltd (ASX: VHT) share price is edging higher today after reporting its full-year results for the year ended 31 March 2020.
Volpara is a New Zealand-based, small-cap ASX share that develops and sells software solutions. It facilitates the early detection of breast cancer by improving the quality of mammogram-based screening programs.
What did Volpara announce?
For the 12 months to 31 March 2020, the company reported total revenue of NZ$12.6 million, up 153% from NZ$5 million in FY19. Within this, growth in subscription revenue continued its upward trajectory, up 106% on the prior corresponding period to NZ$9.1 million.
Volpara expects growth in subscription revenue to continue in FY21 as it pivots MRS Systems – a provider of breast clinic management software acquired in mid-2019 – away from a capital sales model to an almost solely software-as-a-service (SaaS) model. Additionally, the full end-to-end platform will be available for sales.
Despite an improvement in gross margins, which was up from 83% in FY19 to 86%, the company recorded a net loss for the year before tax of NZ$22.3 million. This compares to a loss of NZ$11.8 million in the prior year.
This was primarily the result of an increase in operating costs due to organic growth and the additional costs incurred after the MRS acquisition. Operating costs increased 110% from NZ$17.1 million in FY19 to NZ$36 million in FY20.
Nonetheless, as revenue continues to grow faster than operating expenses, the company improved its net margin from -235% in FY19 to -176% in the current period.
Given the uncertainty on business activity resulting from COVID-19, the company has undertaken various cost-saving initiatives. Volpara expects these initiatives will yield reductions of between 10% and 15% on annualised operating costs.
Looking to cash flow, Volpara increased its cash receipts from customers during the year by 193% to NZ$16.3 million. Its cash balance as at 31 March 2020 stood at NZ$31.4 million, which has now expanded to NZ$69 million following a recent capital raising. Importantly, the company remains debt-free.
Outlook and management commentary
Looking forward, the company recognises the world has changed with COVID-19 but highlights the critical nature of breast screening.
Volpara will focus on long-term SaaS contracts which appear resilient despite COVID-19. Most of its contract are 5-year annual rolling contracts, paid annually in advance. The company noted that cash collection continues to be strong, with no obvious signs of any significant churn risks.
Commenting on the full-year results, CEO Dr Ralph Highnam said:
"FY2020 was an excellent year for Volpara. We successfully conducted our first acquisition, medical software company MRS Systems in the United States, and built an installed software base covering over 27% of US women screened for breast cancer."
"Despite the current Coronavirus pandemic, we ended the year with our strongest Q4 to date and Annual Recurring Revenue (ARR) of over NZ$18M. This has set up the strong accounting revenue numbers we're presenting today, showing very significant growth year-on-year," he added.
At the time of writing, the Volpara share price is trading 0.35% higher for the day after being up by nearly 4% in morning trade.
