Volpara Health Technologies Ltd
ASX:VHT
Earnings Call Analysis
Q2-2024 Analysis
Volpara Health Technologies Ltd
Teri Thomas, Volpara's CEO, presented the company's second-quarter fiscal year 2024 results. Volpara is a Software as a Service company focused on saving families from cancer. They offer software to identify cancer risks and manage mammography workflows efficiently through AI technology. This quarter, Volpara placed significant emphasis on customer engagement and renewals, resulting in strong customer retention and increased contract values.
Craig Hadfield, the CFO, discussed Volpara's financial achievements. The quarter saw a milestone with cash receipts surpassing $7 million USD and net operating cash flow hitting a positive $1.2 million NZD. Volpara has shown positive net operating cash flow for four consecutive quarters and notable improvement compared to the previous year. The company is in a strong cash position with over $13.3 million NZD on hand by the end of Q1.
Volpara's SaaS metrics demonstrated steady growth, adding over $1.2 million USD of net new CARR in Q2, reaching a total of $28.4 million USD. Renewals and expansions with key clients contributed to this growth, such as Memorial Sloan Kettering, Northwell Imaging, and Hackensack. The company welcomed new customers during the quarter, further increasing their annual recurring revenue to $22.5 million USD.
The average revenue per account (ARPA) saw a strong increase, growing from $39,000 to $40,400 USD. Volpara aims to maintain this upward trend as part of their strategic growth plan. Despite some technical difficulties during the call, the company remains optimistic about future prospects and continued customer engagement.
You don't have any saved screeners yet
[Audio Gap] Volpara's Q2 Results Investor Webinar. On the call today, we have Teri Thomas, Volpara's Chief Executive Officer and Managing Director; Craig Hadfield, Chief Financial Officer, and we will also be very, very shortly joined by Jill Spear, who is currently having some technical difficulties, but she shouldn't be long and she is Volpara's EVP of Sales and Marketing. So when we with do the presentation today, Teri, Craig and Jill will run through some of the operational and financial highlights, and then we will be conducting a Q&A session at the end. [Operator Instructions] So thank you very much for joining again, and I'll now hand over to Teri.
Thank you very much, Hannah. A slight correction. Jill is EVP of our sales and customer versus sales and marketing. And we believe that a focus on our customer is extremely strategic and important for us as you'll hear a little bit more in this presentation. So anyhow, hello. So Craig, Jill, shortly and I are delighted to present to you the results of our second quarter fiscal year 2024, which ended on the 30th of September of 2023.
And let me first thank those of you who have invested in us and for anyone new to us, I'll give you the 30-second summary of who we are and what we do. Now we exist to save families from cancer. We are Software as a Service company. We make no hardware, and that helps us -- we help customers identify a person's risk of breast and other cancers. We also provide software to manage the workflow in a clinic that does mammography.
We automate reporting. We apply artificial intelligence or AI, which is quite a hot topic in our industry right now to assess image quality as well as density of breasts, and we make a lot of the work of this very, very heavily regulated area of mammography, far easier and far faster through the use of Volpara Technology.
Now this has been a bit of a different quarter for us, but in a good way. We have focused heavily on our current customers. We had more contracts up for renewal than we have ever had before, which has given us a lot of work to do. And this is fun work. We find engaging with our customers as quite rewarding, and we're delighted that our churn is very low and our customer engagement is strong.
Our customers tend to stay with us. And this quarter, we focused on ways for them to increase what they do with us, adding products, increasing volumes as well as helping our customers commit to longer-term contracts, which, of course, secures revenue for us for years to come and increases predictability.
Now we've engaged with our customers at multiple levels, and this will pay off well for us in the long run, including an initiative to get our product and our engineering staff directly connected with our customers, which is absolutely critical for the effectiveness and the efficient development of new products like our new product in the hopper right now, Quiver. I'll talk about that more a little bit later. And I could spend the entire time talking about our customers because this is what we're here for. It does fuel my ability to ignore jet lag. I just got back from the United States.
However, for now I'm going to turn it over to Craig to talk about our financial performance this quarter, and then we'll have Jill speak about sales, and we do have some cool news. On to you, Craig.
Cool. Thanks, Teri. So I'm going to talk about the cash metrics and the SaaS metrics before I hand over to Jill if she has made it on otherwise, I'll hand back to Teri and then she can hand back to Jill.
So this quarter represents a number of milestones for Volpara as a business in a number of respects. It's our first quarter with cash receipts of over USD 7 million. It's also our largest quarter of cash receipts to date in NZD, so $11.5 million.
Net operating cash flow was positive again, and this time to the tune of over NZD 1.2 million. It was also our fourth consecutive quarter of being net operating cash flow positive. And in total, we've generated net operating cash flow of NZD 3.4 million in the last 12 months. This is a huge improvement on the 12 months before that, where we burned through $11.8 million. So that's a $15.2 million improvement or 129% in just 12 months. The 12 months ended September also resulted in Volpara being free cash flow positive to the tune of NZD 730,000.
We were also free cash flow positive this financial year-to-date, although that is subject to being audited right now by PwC. But as of now, we are free cash flow positive. Both this and the operating cash flow results are significantly ahead of guidance and internal expectations. We've continued to invest in the business for growth, but at the same time, our business model and the resulting cash receipts aided by the U.S. strong dollar -- the strong U.S. dollar have seen significant growth and improvement allowing us to beat expectations and guidance.
Cash on hand at the end of Q1 was [ NZD 13.3 million ], and that's up over $1 million from the end of Q1.
If I turn to the SaaS metrics, or the recurring revenue metrics. During Q2, we added over USD 1.2 million of net new CARR. That takes total CARR to USD 28.4 million. And that's pretty much exactly in line with the cash receipts we received for the quarter if you divided the USD 28 million up into quarters.
Among other sales of notable deals we signed were renewals and expansions with Memorial Sloan Kettering. They are renewed with us for a further 5 years for the Analytics & Scorecard, and they actually added Risk Pathways during the quarter, bringing their total contract to over USD 165,000 with us.
Northwell Imaging, which is one of our really big elephants renewed for a further 5 years as well, and they expanded the contract for Live, Analytics, Scorecard and Risk Pathways -- their added Risk Pathways, bringing their total contract to over USD 440,000.
Hackensack, who also renewed for a further 5 years and expanded the analytics contract by adding Risk Pathways bought their annual contract to over USD 250,000 and became an official elephant. And Avera Health was another customer that renewed for a further 5 years and also grew their portfolio with us to over USD 250,000 and also becoming an elephant.
And a customer that we don't really talk about that often and sort of flies under the radar, but who continues to keep buying from us is the Veterans Affairs or also known as the VA in the U.S. They added over USD 170,000 in net new car during the quarter, and that actually takes them over the USD 1 million U.S. mark per annum in business with Volpara, so a very important customer to Volpara.
We also added a number of new customers during the quarter. Some of those are Northeast Georgia Medical Center, Riverside Medical Center and West Tennessee Imaging Center.
If I move on to recurring revenue -- annual recurring revenue. We increased that by USD 1 million from the end of Q1 FY '24 to USD 22.5 million. And as I flagged in the previous quarterly where ARR increased by only USD 600,000, we saw an improvement here to a more typical quarterly increase of $1 million. We do expect that to increase by more in the second half of the year as we have a number of large installs slated to go live in H2 compared to those that went live in H1.
And then lastly, I'll touch on ARPA, so average revenue per account. We continue to see a strong increase there. So we grew from USD 39,000 at the end of Q1 to USD 40,400 at the end of Q2. And just for interest sake, and it is on the quarterly that we launched on the ASX earlier, we've seen our average revenue per account grow at a compound annual growth rate of 21% year-on-year for the last 2 years. So it's definitely a trend we want to see continue. And just for perspective, that was less than USD 30,000, 2 years ago to well over USD 40,000 now. So a big increase, and that's all part of the elephant strategy.
And with there, I see Jill is still not on. So in the meantime...
Give it back to me for a minute, Craig.
Hand back to you, Teri, and then you can hand back to Jill.
I'll give it to Jill in a minute once she joins, but I do want to note a couple of key things, not only cash flow positive way ahead of schedule, which we're quite proud about. But I don't want to go too fast past some of those new customers to join us. We now have more than 1 customer that generates over $1 million annual recurring revenue that is huge. We have that first milestone with RadNet last year, and it's nice to see that our engagement with the U.S. government has the potential to continue growing and getting that over $1 million annual recurring revenue. And I hope and expect in the future, we'll add to that special club.
The other thing is Memorial Sloan Kettering is absolutely one of the most respected institutions in our industry. Really globally, they are a leader in cancer care. And so it's absolutely amazing validation of our work for Volpara that leaders in our industry could select to not only work with us with 1 of our pieces of software, but to continue to grow their footprint and their engagement with us. So not only is that a really good sale for us that they've committed to 5 years, but that they've also now got both analytics and our Risk Pathways very, very validating for what we do.
So while I wait for Jill to join. I'm going to walk through a couple of things about sales. And when she joined, she can take over. First of all, I introduced a long time ago, a focus on larger customers. And as Craig mentioned, the growth in our annual revenue per account is really, really strategic for us, and I introduced the concept of elephants. So focusing on larger customers and some of the activities that we're doing in the sales team, we have fun with the title elephant. So we started talking about these elephants over a year ago, but have been focusing on building this pipeline for a couple of years.
And in a company driven to be cashflow positive, keeping our sales team small has been really important. And in order to maintain our growth, we really need to focus our efforts and maximize the benefit of our experienced sales team with depth of knowledge in the industry, focusing on larger opportunities and our customers. We've called them elephants to represent the impact that they have on our growth and their value to us and I entrust Jill with driving that team and that elephant strategy. I'm going to introduce her now and hand it over for her to talk about elephants, go Jill.
Thank you. And sorry for that. I apologize technology took me out today. So I love talking about elephants. And as we focus on this group that really brings a lot of value to us and impact, it matters to us because we know when we get an elephant, a customer that's really large and doing wonderful things with our software, we're really making a difference for a lot more women.
So what is an elephant to us? It's a customer that performs around 50,000 screening mammograms annually. And we've identified in the U.S. market about 250 elephants today.
Fewer than half of those elephants are actually using Volpara in their clinical practice. So we have a lot of potential in this demographic of users that we can go after and work with.
We work with them to understand their challenges, offer them solutions. And when an elephant sized customer is contracted for over $250,000 in annual recurring revenue, we consider them a realized elephant. So they're a really large customer, and they're using us at scale. That's how we define an elephant.
I should also note that an elephant -- even an elephant customer using us at a large scale can often still grow. But at this point in time, we call them an elephant in our herd, and we have 23 elephants today.
Sometimes 1 site in an elephant hospital network or an elephant-size customer will use our software or maybe just use 1 software solution across their network. But because of that smaller size, they're using us only for less than $250,000 or contracted for less than $250 with us. These are still elephant-sized customers, but they've just not grown to be an elephant with us yet. If they're using our software and they're contracted for more than $100,000 in annual recurring revenue, we call them a calf, an elephant calf. and we have 75 elephant calves today. And often, these will grow to be elephants. This quarter, we had 2 calves become an elephant, and a third customer grew to become almost an elephant, they are just a very big calf with us.
So all of these animals might sound confusing but it's really helpful to us and it truly is fun for our customer success and support teams to work with these customers and help them realize their goals with our software and support them on their journey as they find success and grow, as I mentioned, it has a much bigger impact on their communities because they're so big, and it's rewarding on our mission of saving families from cancer, as we know that our software is touching more families. We talk about herding new elephants into our game reserve and growing the elephants on the preserve quite a bit.
They do make our orders volume lumpy at times. You might recall some of our elephants from last year, like RadNet, Adventist West, Banner, Sutter and Bon Secours. Half of these grew from calves and half started as new elephants just from scratch. So these pack come in different flavors with us for sure. We do have a couple of other things for sales, I wanted to focus on besides elephants. So if you could go to the next slide.
First is the NAPBC, and this is the National Accreditation Program for Breast Centers. Meeting this certification identifies a site that is committed to the highest standards of care for patients with breast diseases, including cancer. This organization has just updated their standards and are shifting the focus to more personalized care delivery with greater use of risk assessment and preventative protocols. So 2 examples include the recommendation now within this organization for risk evaluation at screening and diagnostic exams and then notifying patients and educating them about breast density and increased risk.
Across the U.S., there are 530 certified sites today, 17% of these are already using Volpara Risk Pathways to power their risk assessment and fewer than 5% are using a different solution -- a competitive solution to do this. So this means that 75% of the sites need to build a plan to offer risk assessment and 16% of these are elephants. So we're excited about this and focusing on the patient engaging on her risk assessment and talking with all these sites to learn how we can support their plans.
Overall, this is a good short-term list of potential customers for our risk pathways product that are likely to buy software to support accreditation moving forward.
Next, we have 2 sales roles posted to expand our clinical talent and offer more clinical demos of the products. Sales staff who well understand the world of the customer, clinical workflows and our software will be powerful ambassadors for Volpara to drive future elephant sales with strategic consultative selling. We plan to increase the number of demos we are doing and increase our lead generation activities as we roll into the biggest trade show season, which is November. So speaking of this trade show season, a big focus for us right now is the RSNA, which is the Annual Society Meeting of the Radiologic Society of North America. This is the largest trade show we attend each year and our largest source of sales leads. We're gearing up to that in November and plan to meet with all of our customers and prospects that attend the meeting.
So we do have a lot more going on. As Teri mentioned earlier around renewals. We're doing an investment in gong, strategic sales support software. And we're seeing a great increase in attendance of our user group meetings in Volpara Hive.
Our focus is to keep building new elephant relationships and expanding our existing user base. We expect to keep growing at our current rate, adding new customers, but do understand it may be in a lumpy way, as I mentioned, referenced in our explanation of elephants.
So I think I'll turn it back to you, Teri.
Thank you very much, Jill. It certainly has been a busy and exciting time for Volpara, as we enter this part of the year, when the industry, particularly breast cancer gets the most attention, given that October is breast cancer awareness month and that we have RSNA in November. And then, of course, the end of the calendar year when many U.S. organizations close out their budgets and finalize their plans for next year. So we will be working hard. Your team is going to be kicking and I thank you, Jill, for all of your hard work and bring up the next slide.
Where you see Jill on a big screen. She is on a very big screen. I myself spent 7 weeks over half of the quarter away from my New Zealand home on the road attending conferences. I met with some very well-respected researchers, luminaries in our industry, partners and also got to know more of our customers, which I always enjoy. And it was great to see the progress in Europe primarily from attending EUSOBI, which had record attendance in their chosen location in Spain. Europe is slowly evolving into a better market for us as interest in leveraging technology to improve mammography grows, we see progress in European nations leveraging SaaS technologies, and we continue working with several of the European industry leaders on best practices that we anticipate will drive national screening programs as well as some interesting prospects in private imaging chains in Europe.
It's not prime time yet, but it is progressing. AI was a hot topic in literally every meeting as was risk and productivity in Europe as well as the U.S. Tools to speed up radiologists and improve their quality are of high interest as everyone cited staffing shortages with the exception weirdly of the Netherlands. In the U.S., we attended 2 conferences. Becker's Healthcare IT and Digital Health Conference, which was also rather a buzz about AI with an emphasis on employers, insurers consumers and some of these directions that Volpara may extend to in the future.
This was also a nice exposure for us at a conference that had over 10,000 attendees, including lots of C-suite health system executives. These are our elephant-type buyers.
Also hot topics, AI and the role of the consumer, radiologists, electronic medical record vendors, and others we saw at Becker's, great place to dig in more on the potential for us to extend to employers or insurers other industry giants did presentations like Kaiser Permanente, and there was a high-profile [ cancer X ] meeting at the Health Conference as well.
One key message consistent across all of the conferences was the clear potential for AI to enhance healthcare with radiology absolutely being front and center and mammography being a very strategic and important specialty in radiology.
I also have the honor to meet with Dr. Cuzick, the name's sake, for the globally most accepted lifetime breast risk model, the Tyrer-Cuzick risk model, and I visited the massive Epic headquarters for a catch-up while nearby for the Beckers conference. And that white funny sculpture is actually from Microsoft. It changed colors based on what they said was the vibe of the people in the building. Very innovative, very interesting.
Next slide. So speaking of Microsoft, during my meetings with Microsoft and Epic and trade shows and customers, one thing was consistent. People love our commitment to our purpose of saving families from cancer. People also really love Kiko, our corporate mascot. So we decided an honor of breast cancer awareness month to use our fun ambassador to remind people to understand their risk and to go in and get their mammograms. And we wrapped the bus in Wellington. So any of you that are based in Wellington watch our fun and happy but with a really positive message bus driving around, and then we've also driven that through social media posts.
And next slide, please. Taking advantage of Swifty fever, we also launched our really fun marketing campaign in the U.S. as well as Australia focused on women aged 25 to 40 because this demographic is often unaware of their own cancer risk, and yet those who are diagnosed with breast cancer in this age bracket often have more aggressive cancers. And the number of diagnoses in this bracket is going up. We are working at this problem from both sides of it, both reaching out to GPs or primary care doctors to health systems but also reaching out to inform consumers and those who engage with the consumers. And we do this because it's the right thing to do.
We are working hard. We are making an impact. We've made really great strides financially. And as Craig mentioned, I've always believed in balancing purpose and profit. It's like 2 feet we stand firmly on and we stand with strength. So with this new financial strength, we're excited about the growth opportunities ahead of us, and we're on track for showing our new product and development Quiver at RSNA as well as driving more quality elephant leads into our pipeline and welcoming elephants into our Volpara family.
I cannot be more proud of our team and our positive impact on families. And with that, that concludes our 4C. We look forward to getting back to work, engaging with our customers and our prospective customers and supporting them in early detection and prevention of cancer. So now on to questions.
Thanks very much, Teri. We do have a few that have come in. Not as many as usual, but that's okay. And I'm just going to start from the top. So how long is a typical contract in years?
A typical contract in years is 5. That's our standard. Historically, -- we -- and some of our older contracts that we inherited were annual contracts, and we do have the odd 3-year contract, but our go-forward and most common standard is a 5-year contract with easy renewal.
All right. Thank you very much. Okay. So following the Dutch-based DENSE study, it has surprised me the follow-up seems to have faded. Can you provide an update on the follow-up status and what part Volpara -- and to what part Volpara is engaging?
Yes. I spent a bunch of time on that because the DENSE trial in the Netherlands still well respected and often cited. And so I think the challenges that people all agree that you can save lives by doing MRI on DENSE women. However, when you look at the different health systems in Europe, there are some capacity challenges related to availability of MRI and costs associated with being able to care for these women universally and consistently in the the same way.
And so many of the screening programs in Europe have opted to further study this, for example, in the Scandinavian in countries of Norway, and they're also talking about it, I believe, in Sweden, they're looking at instead of giving an MRI for everyone who has DENSE breasts, can they use Volpara's density to identify a smaller population that is the highest risk of having breast cancer and given MRI to that 3% or 5% for example, that are at the highest risk.
So we do see deep engagement continuing with our research partners in Europe. And I'll thank Melissa and our team that works with our science and research for their hard work in helping these countries figure out the fiscally and practically feasible way to be able to save as many lives from cancer as possible while still working in an environment in which they have some resource constraints.
Thanks very much, Teri. A few more have come in now. Okay, so what percentage of revenue that comes from the U.S.?
I'll let Craig answer that precisely.
Yes, that was relatively easy. So we're hovering somewhere between 95% and 97%, so pretty high from the U.S. at this point. But as Teri spoke to a little bit earlier, we are -- now that we're in a much more financially stable position, we can start to look at expanding that slowly again, but obviously, very carefully and strategically into areas like Europe, et cetera.
Thanks very much, Craig. The next one, what success is the company having at getting customers adding additional products when renewing their contracts instead of simply just renewing the current mix of the products?
I'm going to comment on that and then hand it over to Jill to talk about it a little bit more. One thing that we've done as a company is we've invested in technically integrating our products. So the goal is to make it easy for a customer to have a contract with Volpara and solve multiple problems where they might have started with focusing on just risk or just Patient Hub, now they can do an integrated risk in Patient Hub. And there is some value to that, especially with the bigger customers who like to keep their portfolio of vendor relationships as small as possible. So being able to provide an integrated solution that doesn't require additional IT work. And IT resources are one of the biggest constraints in customers going forward with the new software or enhancing the programs that they have together with also some operational changes within Volpara for our salespeople to be able to sell multiple pieces of software all at once instead of having individual salespeople focused on specialized pieces of software and calling on prospects independently.
So those 2 things are very supportive of us having a much higher new customer multiproduct purchase rate but then also provides a great opportunity, and that's been a lot of our focus in this last quarter. So now I'll give that over to Jill. .
Yes. I feel like you handled that -- answered that really completely. I really wouldn't add anything to that other than to say I think what the last piece is that a lot of our software works together very uniquely. And so as we work with them maybe on 1 solution, say, Patient Hub, one of our products that does mammography reporting. When we layer in density, we can now bring a patient's image into the patient report and letter. We can be sharing better content around her breast density and educating her with QR codes and other components.
So as we work with them, with customer success with 1 product and they see the value of adding other products for their patient care, they're more likely to layer these in and expand. So that's a big part of what we do with customer success, just really educating and understanding their workflow so that we can bring the best solution for them to solve their patient problems.
I'll just add very quickly. In the 4 or 5 customers I highlighted and in the 4C cover letter, the 3 or 4 big, large renewals we did I think every single one of them off the top of my head added Risk Pathways. So we are definitely -- that's just how that quarter fell but we added Risk Pathways to every single one of those customers and significantly increase those contract sizes. So I think that's just proof that we are expanding the product suite, not just the existing portfolio they've got.
All right. Thanks, everybody. Okay. Next question. What is the customer retention rate?
I'll take that one, Teri. Two ways to answer that. So from a churn perspective, our subscription churn is less than 3%, closer to 2%. And our net dollar retention as of the end of September was 112%. So again another indication that we're keeping our customers and they are spending a lot more money with us.
All right. Thank you. Okay. Next question. Is there a risk of focusing on cash flow positivity too much given the large market opportunity? How are you guys trying to balance investments in sales and R&D with profitability? And have you seen a decrease in sales traction given the relative decreases in sales spend?
That's a really good question. It is something we spend a lot of time thinking about, and we're quite strategic and tactical related to the foundation for a long run of significant growth. We reduced our spend on sales a couple of years ago, and yet we look at the actual net new revenue we bring in foro per salesperson is far higher now than it was a couple of years ago. We are slowly growing our sales team, as we mentioned in our presentation that we've got a couple of open positions.
And the key is making sure that we are bringing in the people who are going to have the best success and also the best support, including sales tools, sales training, investing in our staff to make sure that each of those are absolutely indispensable advisers to elephants have a really high win rate, a high close rate. And the goal is to make sure that our elephant strategy is supported by the best professionals in the industry. So with that in mind, we are adding a few people that have some clinical expertise to ensure that we have a really strong consultative sales base.
And we anticipate, we've got 1 new salesperson that's being trained right now and is learning and able to eventually sell into that territory successfully, but it always does take a bit of time to get people geared up. Even if we right now double the size of our sales team through our sales cycle, it would take a while before those people would be able to be increasing our sales. And so it's a strategic longer run build that we're doing.
However, I do feel like with the addition of our couple people, we will have a really well-sized team to be able to be very strategic in how we engage with the highest revenue and the highest return for us. Elephants in the industry and continue to drive that ARPA up, which I think will, in the long run, support a strong recurring revenue base and keep us from needing to do something like a raise in an environment in which money isn't cheap. You guys want to add anything to that?
No.
[indiscernible]
Craig, we have quite a number of questions, which are all very similar. So to combine them all, it is really just -- have there been any changes to your FY '24 revenue guidance and EBITDA?
Yes. So as you know, we're going through our half yearly audit with PwC at the moment. We didn't want to provide guidance until we're audited. Revenue can move around as a result, EBITDA can move around. So until we are audited, we didn't want to make any changes to guidance. So we will provide an update when we launch our half year results in November.
And I don't really want to promise anything now. So I'd rather leave that till in November discussion. We're rather focusing on cash at the moment.
I will add 1 thing though, there is a difference between contract wins and revenue. Revenue requires the customer to be installed and live. So that's just a comment for when we report our results in November.
All right. Thanks very much. Another one here. How is the competitive environment evolving? Who are your main competitors? And why are they choosing either your product or the competitor's product?
You want to talk with this one, Jill?
Sure. I think we play in force very separate spaces. And one is breast density, one is mammography reporting, product quality and then risk assessment. We have different competitors in each space, but no one combines all of those solutions that we do, and that is very helpful to us because these different products interact with each other and they bring a better solution to the patient.
On the density side of things, we're the only vendor that uses raw data and calculates a numerical score and has integrated that into Tyrer-Cuzick. So I think it's really a function of if someone is looking for a density solution, we stand out as the premium solution. The only reason someone might go with a different density provider might be because they have a Hologic [ mammogantry ] and they use a solution from Hologic, something like that.
On mammography reporting. Epic is our largest competitor. And you've probably heard us talk about that in the past when they leave us to go into a fully integrated electronic medical record solution, we actually send them off with a big hub and then introduce them to Risk Pathways because we can completely integrate their risk assessment and high-risk workflows for their patients by doing that.
So that is an -- okay, largest competitor for us. And other than that, the Patient Hub product we're upgrading our existing installed base and bringing new large customers into our preserve. So I think we're doing pretty well with that solution.
With Risk Pathways, really, it's around doing nothing, customers do not offer risk assessment today. They might feel like it's hard to collect the patient's family history. So having things like the NAPBC recommend this and recommend women understand their risk at the age of 25 in premier care or make it as part of a standard of excellence in treating women with breast disease. This is really helpful to us because it encourages people to take a step and do something new.
On positioning and quality, [indiscernible] I think our only competitor in that space, at least that we've seen, and they're really in the start-up phase. So I don't mean to diminish any of our competitors, but it's -- we don't see them very often in the space today. I think within that product space, we're fortunate because we've been out for over 5 years with that solution. We have groups like Memorial Sloan Kettering and MD Anderson, some really prestigious cancer centers that have had the product for 5 years and renew for 5 years.
So it really speaks to the excellence and the quality that we bring with that product. So that's one of my favorite products to talk about just because of how beloved it is in the space. Hopefully, that answered your question.
Thanks very much, Jill. There's a few -- as before, there are a few similar questions. Based on your comments earlier about the EU, Teri, it might be too early to answer this, but I'll combine and read them out anyway. Can you provide any more information at this stage about how much it would cost to enter the EU market and what kind of growth you would expect from that?
Yes. It is premature for us to answer that question. I just got back from -- and as I shared in my comments, my assessment is that the EU isn't quite prime time yet and that it's starting to open up. So we, Volpara are engaging in some discussions with partners and looking at specific opportunities and building a European plan that we would execute next year. So at this point, anything I'd tell you would be not data-driven, and I prefer to do things in a more data-driven way.
So some of it is gut feel. I wanted to assess, are they accepting SaaS. And for example, 2 years ago, in Spain, the answer was hard no. Now it's much more of the standard. But in Germany, no. There are some private chains that I think are going to be kicking off selections that are quite interested in the software that we provide. But I don't want to go forward with a big investment in Europe without seeing a good visibility to the return. So that means I don't want to hire a whole bunch of people, set up there in a hope that we're going to actually get good solid revenue in line with our elephant strategy in the United States, but rather I want to be very strategic that any investment that we do, we see strong visibility to exactly what they're going to do and how they're going to support the sales.
It also is easy to spend a ton in Europe without getting a return because people want to have a lot of different local people to speak in the local languages. So you will see us be cautious about how we enter into Europe and be quite tactical. You won't see us putting all of a sudden a dozen people in a dozen countries in Europe that won't make sense for us.
But based on the meetings that we had in EUSOBI speaking with some partners, even asking how some of the other vendors are doing that are complementary to what we do in [indiscernible] even met with a couple of competitors to see how they're doing. I think a lot of them are in the same situation as us, where they're just not quite seeing people spending enough money to justify the investment in large parts of Europe yet.
So -- we're doing some planning. And as soon as we've got a concrete strategy that we've communicated internally and are ready to execute, we can answer that question in more detail likely next year.
All right. Thanks very much, Teri. Moving on, we still do have quite a few [indiscernible]. So the next question is, capital sales receipts seem to be up on [ PCP ]. Is capital sales still expected to decline as the company focuses on SaaS sales or are there still plenty of customers that prefer this model?
I'll take that one. So a couple of things on that. capital sales, by their nature, are unpredictable and partly why most software companies have moved away from that now, as have we. We do have legacy customers when we acquired MRS 4 years ago that are on the legacy product, MRS 6 or 7. Those are the only customers we allow to buy any capital licenses, and those are customers that haven't upgraded to Patient Hub. We have done a few things to sort of push them along to upgrade and it's working. We've managed to upsell a number of customers to Patient Hub, but there are some that will just move slower for various reasons.
And those ones that move slower, we allow them to continue to add user licenses, those sorts of things. And that's what a lot of that revenue is. We do expect it to continue to decline over time. But we have increased prices on those quite significantly and partly in a push to get customers to move to Patient Hub. So we may see a small bump in the revenue in the short term because of the price increases. But generally, over time, capital sales will continue to decline.
All right. Thanks very much, Craig. There's 1 here for, Jill, and it says what percentage of U.S. mammography providers have come up to date with their NAPBC guidelines. What's that percentage among Volpara's current customer base? It references a slide that you've had before.
Yes. So today, out of that 5 -- there's 530 sites that are listed as certified from the NAPBC and out of that 530, 17% are already using risk pathways today. So they're using Volpara Risk Pathways. 5% of those sites have another solution, which could be within their mammography reporting solution or something else or they might we do it manually. But we -- so we're targeting the remaining sites. There's about 84 elephants in there that we're targeting. It's hard to track the 532 exactly of buying item in a hospital system. So Advocate aurora or Sutter, they might have 3 or 4 sites that are listed. So for a group, an IDN, an elephant that has many sites, they may have 5 sites listed that are certified and some other hospitals that they have or not. So where we're targeting and where we're focusing is around 84 elephants that are there as opportunities for us.
Thanks very much, Jill. There's also another one here, which I think would be good for you to answer. And that is, what's the 1 biggest reason that customers leave their current provider and join Volpara?
I'm trying to -- we do have 4 different solutions. And I want to make a quick comment on NAPBC. I hope everyone does that because it's really great for the women that they are being educated about their risk and their workflow. I think that -- so for Risk Pathways, people are joining us because they want to offer a solution that's fully integrated and easy for their patients to adopt and understand their risk and that fact that they're being driven by some of their clinical providers, primary care physicians to help patients identify their genetic risk at a young age at 25.
For scorecards, so our density solution and quality, it's really because they have a drive to have a standard and standardization and that they're able to be very objective in bringing quality and density education and information to patients instead of being subjective. So really bringing a very high-quality informed solution to their patient base that their whole staff can get behind.
All right. Thanks very much, Jill. Do you have anything to add to that, Teri? [indiscernible]
That's all right. I see we've got lots of questions. Yes, so...
I'm going to try [ fly ] through them. So it's not sort of keeping anybody too long. Okay. So next one, how do you believe AI will change your interaction with your customers, if at all?
You've got multiple different types of AI. So there is generative of AI, and that's quite interesting. Even in our own internal operations, we've had a good guidance for our team about how to be able to speed up what we do and become more efficient by leveraging some of the AI tools and business even how we're supporting and upscaling our sales team as well as some of our other staff marketing, et cetera. So there's internal operations. We are looking at, can we leverage some of the advances in AI for our future product development, looking actually at all of our products. What are ways that we can provide in more advanced next-generation mammography reporting system like Patient Hub leveraging the power of AI to speed up radiologists even more and to make frictionless experiences for radiology technologists as well as radiologists.
We look at -- we apply AI right now to image quality and density, but there's a lot of interest in our industry to also leverage image-focused AI on diagnostics, and it's something that we've talked with several partners about, and we've got some deep expertise in-house as well. So -- it's a hot internal topic that might be related to future products for us. We'll let you know if there's something concrete we can share, but lots of potential there.
And then even looking at the power of AI with our risk pathways, we ingest all kinds of data that lots of other systems don't. There are ways that we provide it into the workflow. And then when we talk with our partners like Microsoft about CoPilot and being able to do things a little faster, a little quicker, we look at nuance now being part of Microsoft's ecosystem and lots of our customers use Nuance. If we are able to pull some of those pieces together and apply our data science and deep learning team, there is enormous possibility for growth for us in the future.
So we've got a number of people that are sort of on the AI channel all day and all night, and the challenge is really figuring out what's the best opportunity for us to focus on and not be distracted by the numerous opportunities ahead of us. So expect this to be a big focus.
Our team, our executive team is all going to be at RSNA. We're all going to be in the same time zone and in the same city. And we'll be talking about a lot of these things in more depth as well as engaging with others in the industry, including our partners.
We have 3 more. So probably for you, Craig, there is a difference between cash flow positive and NPAT positive, are you approaching NPAT positive.
Yes. So I mean, the high little answer to that is the key difference is between cash flow positive and NPAT positive are NPAT includes a number of noncash accounting entries, particularly around amortization of assets, depreciation, share-based payments, all of those sorts of things. And the long -- and the short answer is we're improving on every metric. We're improving on NPAT. We're improving on EBITDA. We're improving on cash flow. We haven't given guidance around NPAT and being NPAT positive.
The only other thing I'll add is we have $70 million plus in accumulated tax losses. So from a transfer pricing perspective and then ultimately, a tax perspective, once we are NPAT positive, we have a very large deferred tax asset that we'll be able to start utilizing and hopefully, we get to start utilizing that in the next couple of years. So yes, we are approaching NPAT positive, but we are right now free cash flow positive.
So I saw that there was a question that came in, and I think went away, and I would love to just quickly explain what Quiver is.
Oh, yes, yes, go ahead.
I referenced it and it's fun. So we internally call it the Binder Reduction Act or the BRA. And what we thought quiver was probably more -- accepted in the industry term, although I have to say our customers love BRA and they're going to be calling it BRA. The idea of looking at all of the FDA requirements on training and physicists testing and service documentation, every single time I've gone to any place that does mammography either are big book shops, full of binders. And so our team sat down and looked at what was in all of those binders and realized, my gosh, there's a lot of the information that they're manually tracking that we can automate.
And there's nobody else that does this. And so I'm quite excited about Quiver. Our team is on track for delivery. We're going to be showing this at RSNA. We've got some IP associated with it. And I think it's going to be one of those things that absolutely delights our customers and once they use it, it will become indispensable. So love a chance to talk about BRA/Quiver, because we want to support our customers in doing their patient care.
And then there was one other question that came up. I forgot it. It was a very simple one for us to answer, but it's gone.
All right. So the last 2, because we are very fast running out of time. How big is the total U.S. market? What is Volpara's share? And how much CARR growth in the U.S. alone?
All right. Who wants to tackle this one? Do you want to get started, Craig, and we'll comment since I know you've done some of this analysis.
Yes. So at a high level, the U.S. market has approximately 40 million women that go from mammograms every single year. We have 3 to 4 core products, and we have penetration of each of those 3 to 4 core products. Saying exactly how much market share we have becomes a bit of a complex question because you can divide it by each product or how many customers have all your products. And when you look at it across sort of overall penetration where we feel like we've sort of maxed out our penetration on a specific customer, whether it's 3 or 4 products. We're somewhere in the region of about 15%, give or take, a couple of percent here or there.
And most of our -- the 3 core, core products being Patient Hub, risk Pathways and Analytics are very, very similar in terms of penetration. They're all hovering around 14%, 15%, 16%, 17% for each of their specific products. So when you combine all those together, it comes out also at the 15-ish percent but that's roughly where we think we've landed in terms of overall market penetration.
So I think the positive is we haven't -- none of them are above 20% in terms of specific product line penetration. Meaning we have 80% to 85% of the market in terms of runway, particularly around Risk Pathways, Analytics and scorecard. When you look at Patient Hub, there's a lot more market saturation there because you have Epic and then you have other competitors. So our Patient Hub is a little bit more challenging to get a lot more market share. But analytics, Risk Pathway, scorecard has a lot of runway. I don't know if you want to add anything, Teri?
Yes. I think the other thing to note is that we, for years, kind of benchmarked against the number of mammograms that happened in the U.S. However, we've kicked off a business planning process related to extending to other types of customers for our risk pathways product, including figuring out and we're doing some competitive review and market analysis and trying to do a very informed planning process where we evaluate extending to employers, insurers. We're already in primary care. So it might be that we just say, look, we're going to do a big push for primary care, and that's not bound necessarily to mammography statistics.
I personally believe passionately that women need to understand their risk of breast cancer, starting at age 25, and I'm not the only person who says this. This is actually the consistent recommendation across the ACR, the NCCN, all of the bodies that make these recommendations in the United States. And yet, the tools to be able to do it in a frictionless, seamless way that providers trust, they understand what it means, and they can provide appropriate guidance to patients are really lacking. We have the ability to provide the information in an Epic ambulatory workflow. And Epic is the EHR provider that has the deepest and most growing market penetration in the U.S., including in primary care.
So that one particular direction we're studying. We can't tell you this is what the potential is yet because we literally kicked this off last week. However, there is really interesting potential for us to extend our products into other areas not tied to mammography.
The other thing I mentioned in the AI context is there are certain functions that our software does that we are looking for, are there ways that we can provide automation that fits nicely within an Epic workflow instead of as either choose our Patient Hub or Epic.
So we're also looking for ways to be able to reinvent some of what we do together with leading organizations like Microsoft who's interested in engaging with us on creatively creating a new possibility for products that people haven't thought of quite yet. So I'm quite -- it's a complicated question about market penetration, which would be easy to answer if we were standing still, but we are not.
All right. Thanks very much, Teri. We now have to go, unfortunately. There is 1 question that is unanswered, but I will e-mail you that person directly and provide an answer to you. Sorry, we have to go to an analyst presentation now. Before we hang up today, Teri, do you have any closing remarks?
No. It's an exciting time for us. We're busy. We're energized. I've got a great team who is very passionate and competent. And it's an honor to work with them, and thank you for investing in us.
Thank you very much, Teri, Craig and Jill, and thank you, everybody, for joining us today. This webinar has been recorded, it will be put on the website soon. It's a big file, so if we take a while [indiscernible], but it will be there. So please refer to the website if you want to come back and watch it again. And again, thank you very much for watching, and hopefully, we'll all speak to you soon. Bye-bye.
Bye.