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Good morning, everybody, and welcome to Volpara Health's quarterly results update webinar. On the call with us this morning, we have Dr. Ralph Highnam, CEO of Volpara. We have Craig Hadfield, Chief Financial Officer of Volpara; and we have Jill Spear, Executive Vice President, U.S. Marketing and Sales.I will now hand over to Ralph, who will commence his presentation. Thank you.
Thank you, Hannah. Hello, thank you for your time today to hear about our busy and strong Q3 FY 2022, ending the 31st of December 2021. Volpara is on a mission to save families from cancer, and I am incredibly proud that our software is now contracted to be used in over 35% of U.S. breast cancer screenings. That software is helping ensure the patient experience is personalized, safe, comfortable and effective, with cancers being caught as early as possible. We truly are making a big impact every day, and we thank you, the investors, for helping us make that happen, and we like to confirm upfront that we're well on track to meet our guidance for the year of accounting revenue of $25 million. However, as you're all aware, public listed innovation companies are currently suffering from wider macro trends and wider geopolitical concerns that they and we cannot control. What we can control, of course, is how we evolve the company to thrive in the new environment, to maximize impact and shareholder value, and I'll touch on that as we go through today's report.So as per the ASX announcement that went out earlier today, we're very pleased with how Q3 has landed despite the arrival of Omicron, and today, we'll be covering, as usual, the traditional 4C cash numbers, which again show strong cash receipts, the SaaS-based metrics showing strong growth over the quarter and then operational news.As Hannah said, we are joined today by Craig, our CFO; and by Jill over in South Carolina, and we'll all be available for questions at the end of this call.Okay. Let's start then on the 4C cash metrics. We have said during Q3, we had one of our strongest quarters to date for cash receipts from customers hitting NZD 7 million of receipts, up over 50% compared to last year. With those cash receipts being almost all then from subscription sales and those numbers reflecting, of course, both organic and inorganic growth. During the quarter, we had net operating and investing cash outflow of NZD 3.6 million down from Q2, as we start to see cost synergies come into play, post the CRA acquisition. I'd like to, at this point, just to thank Ed James, the former CEO of CRA, for his efforts over last year, as we've brought the companies together and wish him well now as he heads off into retirement in Florida.Optimizing the productivity of the entire company has been a picture of the last year as we look to become increasingly scalable. There will continue to be an even bigger focus now over FY 2023, as we have to leverage the team, products and partnerships that we have to move more aggressively towards cash flow breakeven.Cash on hand at the end of Q3 was a little over $21 million, leaving us through a continued strong bank balance and approximately 6 quarters of cash on hand, our current run rate, and that includes earnout considerations, which we're working formally through now. The company continues, of course, to have no debt on its balance sheet at all.Turning now to the SaaS or recurring revenue metrics; let me just remind you then, all the new quotes of Volpara products are now subscription based, but there's still a few historical capital deals coming over the line. However, as can be seen from our quarterly cash flows, those capital sales have continued to reduce. This -- the change to SaaS we did a few years ago continues to be a key differentiator for Volpara in the market, and we are seeing more and more companies in the medical consumer space trying to adopt this struggle to change, due to our legacy capital sales business structures. So we're in a very strong place industry-wide around that.During Q3 and despite coronavirus and the arrival of Omicron, we added almost USD 1.1 million of net new ARR, thanks to some outstanding upsells into installed base and some major new deals, with the focus of the quarter being deals with Patient Hub, Risk alongside Analytics or Scorecard and so on. Biggest in the quarter was [indiscernible] at $360,000 annual recurring revenue for Risk. They've already gone on now and brought Analytics to one site, and we're actively pursuing further upsells at their remaining sites. Those deals bring our contracted annual recurring revenue to over -- well over USD 21 million, which is over NZD 30 million based on exchange rates today. The ARPU across the installed base has risen again to $1.47, with deals in the quarter averaging $1.65, but the range of ARPU in the quarter being under $1.05 for a very large strategic account, which had lots of big upsell opportunities playing out, and then up to $6.70 almost for a site who brought Analytics, Patient Hub and Risk products.Net churn of a SaaS ARR remains low, and we now have our product contracted to helping over 35% of the U.S. screening population. That means we're now covering well over 1 in 3 women being helped by our software. That obviously provides us with ever-expanding opportunities to upsell, which we're seeing more and more of, as we noted in the 4C. Our upsells are now making up approximately 1/3 of net new ARR. In short, Q3 was strong, despite the ongoing pandemic, and that's a real testament to the sales and marketing team we have under Jill and the momentum that they've generated, and as a reminder, that she and Craig are both available online now to take questions.So with that, Hannah, I'd like to open up the floor to questions.
Thank you very much, Ralph. If you do have a question, please feel free to use the box at the bottom of your screen. But we do have -- have received a few questions in advance, which are, do you expect your year-on-year revenue growth to continue on the same trajectory.
Sorry, Hannah, can you repeat that one?
Do you expect your year-on-year growth to continue on this same trajectory?
Yes. So we are busy now planning, obviously, for FY '23, and we've not yet given any guidance out obviously for that next financial year, but certainly the way we're looking at things, we're seeing good growth quarter-on-quarter. And yes, we're pretty bullish about the future and where we're going.
I might add to that, Ralph, as well. We have contracted annual recurring revenue of over $30 million now. Our guidance for this financial year, FY '22 was $25 million to $26 million, which, as Ralph mentioned, we're on track for. So with the business we already have, with the customers we already have, we should show a strong organic growth for FY '23 as well. We haven't put guidance out for that. But for us, it's all about the installations. If we can get those customers installed, we should continue to show strong growth, because the business is already there.
Thank you very much. Next question, the Australian and the U.S. healthcare sector has performed very badly over recent months, which is well known, what is your outlook on what this year holds for both Volpara share price and the outlook of the sector in general?
Yes. So it's a great question, and I'll answer it kind of slightly different way. As we noted, right, we're on track to hit the guidance with strong growth in recurring revenues and generally we feel in a pretty positive position in a very robust healthcare sector commercially, but obviously, Omicron in the ANZ, the U.S., macroeconomic trends and geopolitical concerns -- have all raised concerns about many innovation stocks globally, including us. And having said that, myself and all the Board are obviously major shareholders, and we feel some of that pain. I firmly believe that if we continue to execute well in the fashion we did, a shareholder -- the share price and shareholder value will really return in due course.We did, of course, see a major dip in share price post the first -- sorry, post the start of the pandemic 2 years ago, and we recovered pretty well after that. So obviously, it remains to be seeing how things play out, but once we keep executing well, build a very strong business, which we do, we'll be in a good place for the future to continue to make a big impact for women globally.
Okay. We have some questions from the floor. Hello, when do you expect to become cash flow positive?
Yes, that's another good question, that's kind of tied in with some of those wider concerns about innovation and tech companies globally. Again, we've not given any guidance out on that, but certainly, it's become a real kind of a focus point for our internal discussions now. As Craig said, we've got lots of contracted revenue sitting out there. If we get them installed, we're going to see strong organic growth in revenue, without having to do a huge amount of engineering and other work. So the FY '23-'24, we see those as being key ones to start moving much more aggressively towards cash flow breakeven.
Okay. Thank you. This is a really interesting question, with the increasing demand for IT professionals and other highly skilled staff due to the global talent shortages, what is Volpara doing to retain its staff, specifically IT staff and other integral members of the team?
Yup. No, it's a great question and obviously, I think with the closed borders in New Zealand and also around the world, is a topic. Our team and our company, right, we're focused on saving families from cancer, that's one of the things we really sell to our staff and to new employees in particular. So you're coming to work, not just to earn money, but to actually make an impact, and we really believe that goes a long way to retention, especially in the competitive market that's out there today. We also look to provide a fantastic supportive environment, in which people could come in, grow and develop, as well as playing market-related strategies. We're also pretty fortunate now in being able to recruit globally, thanks to those New Zealand plus U.S. teams that we have in place, plus, of course, because of the pandemic, we're actually all very used to now working at home. And so, pulling in people from other parts of the world to work for us, is simply not an issue anymore.
Okay. You recently announced your largest deal to date with Akumin. When do you expect installation to compete across the entire Akumin network?
Yes. We've signed up quite a few big deals recently, including the one I noted a bit earlier. Some of them move very quickly and some of them move more slowly, and I think fair to say the Akumin one is on that slower side of the scale, but certainly in the next 3, 6 months -- we're making good progress with them now. But certainly over the next 3, 6 months, we're looking to get fully implemented there. Yes, we talked a little bit about COVID and the pandemic. We're not really seeing that flow through so much on the sales side and breast cancer screening itself is kind of very used now to operating in a pandemic environment. The one impact we are seeing is hospitals having a lot of IT people off, because of COVID and self-isolate and so on, and that does tend to slow down some of the installations. And again, we come back to one of Craig's earlier comments about contracted revenue versus what we got installed. And that's why as well, we know we'll have a good year next year, because with these installs, like actually the numbers just waiting to get installed and then we can start to recognize that revenue.
Okay. We have a few more questions from the floor. How are partner relationships Reveal DX, Screen Point and GE progressing?
Yes. That's another great question and obviously, GE and Fuji have been long time resellers of Volpara where -- as we've talked about over the last few years, really, our relationship more is then introducing us to customers and we then go in and support the sale, in fact, we do sell ourselves, which lets us own those customers.At ScreenPoint raised a lot of money in January, February -- I think it was January-February 2021, it might have been a bit later than that. They are developing and continue to publish a whole range of excellent papers around computer, AD detection and AI. I think fair to say, the papers coming out from them are extremely good and look very promising for that future, but that whole area of AI and CAD still looks highly competitive and so on. So the relationship there is good, but there's a lot of competition in that space.The -- and then just separately on the line, obviously, October, November time last year, we signed a deal Reveal-DX. They are still working through regulatory occurrences, clinical papers and see. But really, very much October, November time, that's when we're starting to see much more traction in general on round one, and we want to position ourselves for the future. So we continue to position ourselves, we've had some great discussions with them and others. RSNA, the big show in Chicago and so on. But currently, it's all about positioning, it's all about looking and identifying the real opportunity there to drive commercial value and increased ARR.
Okay. What is the churn rate for SaaS customers?
I can take that one, Ralph.
Yes, go for it.
Yes. So we have a number of different product streams, but our SaaS churn in particular, year-to-date is somewhere in the region of about 2%. So at an enterprise level, we consider that a very good churn rate. Obviously, as a business, we want no churn, that's not realistic, but 2%, we feel is pretty good. And just to note, the net new ARR number we do report, obviously takes into account any churn. So that's over and above the churn that we've reported for the quarter.
Okay. How do you expect the breast cancer imaging industry to deal with the emergence of blood-based cancer screens?
Yes. That's great question. I mean, the whole biopsy stuff has been around now for many, many years, and I think you're starting to see some possibility of that kind of come into clinical practice for those cancers and other diseases, which are not so easily imaged. We do -- we very routinely look at where breast cancer screening is going to be 5 years out, 10 years out, and we certainly include biopsies into those discussions. It might play a role. It might play a role in helping differentiate false positives to cancer and indicating who should go for biopsy. But we are yet to see any really significant results around screening per se. But as I said, we do see a lot more hope for that, in areas where you can't get the body part so easily. Obviously, where the breast is relatively easy to image, it's relatively easy to biopsy compared to the lung, compared to the lever and so on.
Okay. Is there an update on the FDA's decision to mandate and modernize mammogram services, which should benefit Volpara?
Yes. The last update Hannah was -- I think it was October time, when the FDA was reported to be working diligently on it. So other than that, no other update. But as far as we're aware, they're working on it and at some point, it will pop out.
Can I comment on this, Ralph? I think right now, there's 39 states that mandate density in form legislation, so they inform women about their breast density, and that has really been the tipping point, leading to the federal legislation. Likewise, in the genetics space, all 4 major organizations, the U.S., the Association of Breast Surgeons, ACOG, OB/GYNs, the SBI, the ACR, they all recommend that women understand their lifetime risk for breast cancer by the age of 30. Even the U.S. preventive task force has made that same recommendation. So we don't talk about that as much as, because we are historically thought of as a density company, and that was our -- that's our foundation. But truly, the expansion into understanding your lifetime risk, this is very relevant in the field today and breast imaging in the United States, and it's something that everyone is talking through.Earlier, someone asked about how do we work with our partners like GE and Fuji, but also Transpara. We run like a complement, to what everybody is talking to their breast imagers about. If I'm -- and we have deals we're actively working with every one of our partners. So -- and it's about them also pulling us into the conversation, because when they're talking to the breast imagers in the United States, they're asking how do I deliver a patient's risk to her? How do I inform her over density? And how do I ensure that I have great quality. And like Fuji is having a quality conversation and GE might be having a density conversation with the client, and that's where we kind of round out their portfolio and bring value to them.
It's a great point, Jill. And so the key point there that you need to know, there's been a lot of focus on the FDA because that's a great tailwind. But in the background, there's all the state laws. There's lots of just national-wide initiatives, which are also then generating lots of tailwinds for us, and we're in a very strong position to ride those tailwinds.
Okay. Thank you for that. What are your strategies for further global expansion?
Yes, that's a great question, Hannah. The -- when the pandemic struck 2 years ago, we made the conscious decision, to really focus on the U.S., Australia and New Zealand, whilst continuing to do a lot of research work around the world, such as the DENSE Project in the Netherlands or PROCAS in the U.K., all the work we're doing up in Belgium or Norway, and then supporting luminaries across Asia, and given the momentum we're seeing in the U.S. and some of the deals we're seeing now in Australia, in particular as well, that is going to very much remain our focus. We are not going to be spending a huge amount of money trying to -- on people up in Europe, for example, but we will be -- you will see us doing more partnering up there, to share some of those costsYes, we are -- so I guess, commercially, U.S., Australia and New Zealand, but we're very much going to stay a global company, and as the pandemic settles down, we will be looking to probably change what we do out there, but for now it's more about partnering and letting local distributors do the hard work for us.
Okay. We have one final question here. What is the significance of the 56 million raw images you have in the cloud?
Yes, that's a great question, and there's been a fair bit of discussion around some of that data recently. The -- we were not one of the first companies to move on to the cloud. We did that in 2016, and that's why all that data has been flowing up there. For those of you who kind of have been watching some of the AI companies, just in general in healthcare, you'll have seen, for example, recently that IBM Watson was sold to a private equity firm, after spending 5, 6 years, trying to break into the medical imaging market and medical market with their AI. And AI's work in healthcare is extremely difficult.One of the reasons for that is, that most new companies come into the space and they try and target the images, which the radiologist sees for their AI processing. The trouble with those images, is that they've been very heavily processed by the external manufacturer, whether that's GE, Hologic, Siemens or whoever, they all changed those images in many different ways, to make cancers more visible. And every time they kind of play around the processing, it makes it much harder for AI to work robustly across sites and between populations.So Volpara going direct to the X-ray machines and getting the raw data, puts us in an incredibly strong position to devise and run a very reliable, very robust AI algorithms. So that's the reason why we're in a very, very strong position around AI in general.Then the question is, okay, with all the AI -- the great raw data from multiple machines, what next? We've already kind of exploited by building a fantastic new density algorithm, which is much more reliable to outliers, such as implants, fingers, shoulders, PET image, and we're now doing a lot of work, and we've touched on this over the last year, looking at ways of how can you predict breast cancer there? Jill talked all about the tailwinds around breast cancer prediction. Huge amount of them, the risk models that are out there are good, but they've only been -- they were devised on 10,000 women to 2,000 women. We have the potential with that data set when we link the images up to the patient data, to do risk models based on millions of women.We want to move -- we really do see the whole industry. We touched earlier on where the industry is going with blood biopsy rate. But we actually see the industry moving more towards instead of early detection and prevention, your high risk, you'll begin with certain drugs and go into certain preventative strategies. And when you do that, you're going to need to monitor the breast over time. No one's been able to do that before, because they've not had the data at scale, and they're not having the raw data. We do have that, and we're going to be doing things with that data around monitoring and change over time, which no one has ever done before. Well it has been talked about a huge amount, over the last 20, 30 years.So Hannah, yes, I think the data, then the raw data is incredibly important for AI robustness, but then commercialization will come in full prediction, monitoring, detection. As we do that, of course, the key for personalized healthcare is empowering the women to actually help them make a correct decision for them, all the way through.
Thank you very much, Ralph. There are no more questions from the floor. I thank you all for joining us this morning. Ralph, do you have any closing comments?
No. Apart from, of course, thank you for your time. Thank you for helping us make an impact on over 1 in 3 women now every day. We did work this out the other day, it's like 50,000, 60,000 women a day are being helped now by our software in the U.S. That's incredibly humbling and unique position to be, and is a great base to build for the future. And really, as we talked about change the paradigm from detection to prevention, and we thank you all for your support over this period. Thank you.
Thank you very much, everybody. If you do have any further questions or anything else you'd like to talk to Ralph or Craig about, our contact details are on the bottom of all ASX announcements. So please feel free to get in touch. Thank you.