The Volpara Health Technologies Ltd (ASX: VHT) share price has jumped 9% higher after the ASX healthcare tech share revealed positive cashflow.
Volpara provides software that enables medical professionals to screen for breast cancer and evaluate the risk for each patient.
Strong quarter
In the third quarter of its 2023 financial year, Volpara reported that its quarterly cash receipts jumped 60%, or 42% in constant currency, to NZ$11.2 million.
That means that in the financial year to date, cash receipts were NZ$28.6 million, up 39% year over year.
This strong quarter enabled the company to achieve the first positive net cash flow quarter on record. It achieved cashflow of NZ$1.3 million, an improvement of 134% from the outflow of NZ$3.8 million in the third quarter of FY22.
I think this is great news for the Volpara share price and heavily implies it won’t need to raise any more capital to fund the ongoing operations of the business.
The company explained that this happened because of three things.
First, a material uplift in cash receipts due to improved debtor days. In other words, the company is being paid quicker.
Second, reduced costs due to the redundancies made in the second quarter of FY23, with overall cost reductions being in line with Volpara’s revised strategy of cutting costs.
Finally, it noted government grants and the research and development totalling NZ$0.9 million. But, even without this, it would still have generated positive cashflow.
In terms of its annual recurring revenue (ARR) statistics, Volpara revealed that its contracted ARR has reached US$25.6 million, up around US$1.5 million from the second quarter of FY23. That was the joint largest increase on record.
Management comments
The Volpara CEO Teri Thomas said:
We are happy to show successful execution of our strategy focused on profitable growth. As planned, our top line continues to increase while our cost base has declined. We continue to emphasise sales and positive engagements with our customers alongside settling into our streamlined operators.
Final thoughts on the Volpara share price
I think Volpara is very promising and is achieving strong growth. It has good unit economics, it just needs to keep growing to become very profitable.
I’m not sure how large it can become, but with the Volpara share price under $1 (when it was previously above $1.50), I think it has plenty of potential to deliver good returns.
