The Volpara Health Technologies Ltd (ASX: VHT) share price is under scrutiny this morning after reporting its FY21 result, showing a big increase in subscription revenue.
Volpara’s FY21 report
Whilst the business reported that revenue from customer contracts was up 57% to NZ$19.7 million, the subscription revenue doubled to NZ$18.1 million.
There is an ongoing transition to a software as a service (SaaS) model for MRS legacy products. The MRS Systems business was acquired in 2019.
It now has annual recurring revenue (ARR) of around NZ$27.9 million, which includes a 20% organic year on year increase. Volpara also estimates that it has at least one software product being used in the screening of approximately 32% of US women for breast cancer.
The standout statistic for me was that the gross profit margin grew from 86% in FY20 to over 91% in FY21. This was driven by several factors, including a focus on cost reductions and scalability of Microsoft Azure, which is the largest cost-of-revenue expense. It also benefited from high margins on CRA Health products and the reduced impact of post-acquisition revenue adjustments which impacted FY20’s numbers.
Normalised EBITDA (EBITDA explained) improved by 21% to a loss of NZ$12.4 million. The EBITDA margin improved from -96% to -61%.
The net loss after tax improved 14% to NZ$17.5 million.
Looking at cashflow, cash receipts increased 20% to NZ$19.7 million, whereas operating expenses only increased 4.7%. That helped overall operating cash outflows improved 16% to an outflow of NZ$14 million. It ended with cash of NZ$32.2 million.
Outlook for Volpara and the share price
Volpara said it expects FY22 revenue will be in a range of between NZ$25 million to NZ$26 million. That suggests revenue growth of more than 25%. Remember, that comes at a very high gross profit margin. So new revenue is likely to add to profit lines very quickly.
This business has a very promising future. It has a great product offering, strong subsidiaries, a long-term plan and extremely good underlying margins. All it needs to do now is grow volume and the profit will start flowing. The focus on personalised risk and connection with genetics companies should help considerably in the coming years.
I think it’s one of the best ASX growth shares around and the pre-open price of $1.25 is attractive for the long-term in my opinion.
