Volpara Solid 4Q trading update as expected

VHT released a solid 4Q trading update. The 4Q is traditionally the strongest quarter and we were not disappointed. 

Of most interest was the increase in ARPU to US$1.40 (from US$1.22 in 3Q), however importantly ARPU signed during the quarter on average was US$2.50. 

With the recent CRA Health (breast cancer risk assessment) acquisition and collaboration with Ambry Genetics, Volpara sharpens its focus onto risk and genetics. Risk identification and genetics are growing trends in personalised medicine and VHT is well placed.

 We have made no changes to our forecast and as a result our target price remains unchanged at A$1.94. Add recommendation maintained. Positive 4Q trading update VHT has provided a 4Q trading update which was solid as expected. 

VHT will release its 4QFY21 cashflow report on Thursday 29th April. The key points from today’s release include: 1) this was the largest-ever quarter for annual recurring revenue (ARR) reporting US$1.1m (NZ$1.6m), 2) ARR now sits at US$18.6m (NZ$28m) which includes 20% organic year-on-year growth, 3) ~32% of women in the US are using one or more of VHT’s products for screening; and 4) average revenue per unit/screen (ARPU) is US$1.40 (up from US$1.22 in 3Q), in part due to the CRA Health acquisition and importantly the average ARPU for the 4Q was US$2.50, with a range from US$1.00 to US$5.65. Focus on risk and genetics 

As interest in personalised medicine grows, VHT is sharpening its focus onto risk and genetics. Following the successful acquisition of breast cancer risk assessment company CRA Health and collaboration with genetics player Ambry Genetics, VHT is well placed to grow its ARR and ARPU. 

Our valuation is most sensitive to increases in ARPU, where a US$0.10 change above our assumption increases the valuation by A$0.43. Catalysts to focus on There are a number of catalysts to focus on including: 1) FY21 results expected late May; 2) FDA publication mandating breast density information to patients; and 3) updates on further state based screening contracts. Investment view – positive stance maintained Given we have made no changes to forecasts our DCF valuation remains unchanged at A$1.94. We have set our target price at the same level. The main downside risk is delays in executing new contracts as a result of the current health crisis. We maintain our Add recommendation.

Company description VHT is a digital health company offering a solution that improves clinical decision making for early detection of breast cancer. VHT’s products are approved for sale in key regions and provide objective evidence that can be used by relevant specialists including the woman herself to make informed decisions about further screening.