The Volpara Health Technologies Ltd (ASX: VHT) share price could be an interesting one to look at with the current price being $1.26.
What is Volpara?
Volpara is a New Zealand technology business that is listed on the ASX.
It operates a software-as-a-service (SaaS) model that utilises AI to improve the early detection of breast cancer by analysing breast images, called mammograms, and associated patient data.
Volpara provides personalised breast care through clinical decision support and proactive management tools. It wants to provide a cost effective reduction of breast cancer deaths, there are around 600,000 deaths globally each year.
Here's why Volpara could be a good option:
Growing average revenue per user (ARPU)
Volpara has an increasing average revenue per user. ARPU is the average revenue achieved per women screened per year at a site
ARPU has risen to US$1.40. The CRA Health business that Volpara recently acquired is growing strongly and has ARPU of US$1.70. The company said that its ARPU rose by over 30% between the second quarter of FY20 and the second quarter of FY21 despite COVID-19 impacts.
The business continues to track acquisition opportunities that could increase ARPU further.
A lot of the existing installed base is using a product that was sold as a capital sale with a small service and maintenance contract, not SaaS. Since 1 November 2019, all quotes and proposals are SaaS contracts. These new deals comprise multiple products. In the second quarter of FY21, ARPU on new deals was between US$1.75 to US$4.30.
Volpara has explained that identifying women who should get genetics testing can lead to a significantly increased ARPU.
Increasing market share
The business has significantly increased its market share over the last few years thanks to acquisitions like MRS Systems and CRA Health.
Volpara's market share increased in FY21 to 32% of US women having a group product applied on their images and data. That compares to approximately 27% at the end of FY20.
The CRA Health acquisition came with a market share of approximately 6%, as well as the integration with electronic health records (EHR).
Strong gross profit margin
The Volpara gross profit margin continues to grow. It is one of the highest on the ASX. In FY20 the gross profit margin was 86% and in FY21 the margin increased another five percentage points to 91%. This could be an important driver for the Volpara share price over time.
That means a lot of the new revenue can fall to the next profit line in the accounts. Over the longer-term, the gross margin could rise even more and help the net profit improve at a relatively fast rate.
