The Volpara Health Technologies Ltd (ASX: VHT) share price is edging higher today after reporting its full-year results for the year ended 31 March 2020.

Volpara is a New Zealand-based, small-cap ASX share that develops and sells software solutions. It facilitates the early detection of breast cancer by improving the quality of mammogram-based screening programs. 

What did Volpara announce?

For the 12 months to 31 March 2020, the company reported total revenue of NZ$12.6 million, up 153% from NZ$5 million in FY19. Within this, growth in subscription revenue continued its upward trajectory, up 106% on the prior corresponding period to NZ$9.1 million.

Volpara expects growth in subscription revenue to continue in FY21 as it pivots MRS Systems – a provider of breast clinic management software acquired in mid-2019 – away from a capital sales model to an almost solely software-as-a-service (SaaS) model. Additionally, the full end-to-end platform will be available for sales.

Despite an improvement in gross margins, which was up from 83% in FY19 to 86%, the company recorded a net loss for the year before tax of NZ$22.3 million. This compares to a loss of NZ$11.8 million in the prior year.

This was primarily the result of an increase in operating costs due to organic growth and the additional costs incurred after the MRS acquisition. Operating costs increased 110% from NZ$17.1 million in FY19 to NZ$36 million in FY20.

Nonetheless, as revenue continues to grow faster than operating expenses, the company improved its net margin from -235% in FY19 to -176% in the current period.

Given the uncertainty on business activity resulting from COVID-19, the company has undertaken various cost-saving initiatives. Volpara expects these initiatives will yield reductions of between 10% and 15% on annualised operating costs.

Looking to cash flow, Volpara increased its cash receipts from customers during the year by 193% to NZ$16.3 million. Its cash balance as at 31 March 2020 stood at NZ$31.4 million, which has now expanded to NZ$69 million following a recent capital raising. Importantly, the company remains debt-free.

Outlook and management commentary

Looking forward, the company recognises the world has changed with COVID-19 but highlights the critical nature of breast screening. 

Volpara will focus on long-term SaaS contracts which appear resilient despite COVID-19. Most of its contract are 5-year annual rolling contracts, paid annually in advance. The company noted that cash collection continues to be strong, with no obvious signs of any significant churn risks.

Commenting on the full-year results, CEO Dr Ralph Highnam said:

“FY2020 was an excellent year for Volpara. We successfully conducted our first acquisition, medical software company MRS Systems in the United States, and built an installed software base covering over 27% of US women screened for breast cancer.”

“Despite the current Coronavirus pandemic, we ended the year with our strongest Q4 to date and Annual Recurring Revenue (ARR) of over NZ$18M. This has set up the strong accounting revenue numbers we’re presenting today, showing very significant growth year-on-year,” he added.

At the time of writing, the Volpara share price is trading 0.35% higher for the day after being up by nearly 4% in morning trade.

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Motley Fool contributor Cathryn Goh owns shares of VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended VOLPARA FPO NZ. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Nearmap Ltd (ASX: NEA) share price has been a strong performer over the last couple of months.

Since March 29, the aerial imagery technology and location data company’s shares have zoomed a remarkable 123% higher to $2.23.

Is it too late to buy Nearmap shares?

Despite Nearmap’s impressive gain over the last couple of months, it is worth noting that they are still trading almost 50% lower than their 52-week high of $4.29.

I believe this leaves the company’s shares trading at a very attractive level for a long term investment. Especially given its high quality software and the fragmented and lucrative market it operates in.

I’m not the only one that thinks that the Nearmap share price is in the buy zone. This morning analysts at Goldman Sachs retained their buy rating and lifted their price target on its shares to $2.55.

Why is Goldman Sachs bullish on Nearmap?

Goldman Sachs was pleased with Nearmap’s better than expected market update on Thursday and named three key reasons why its shares are a buy.

The first is its large and growing market. The broker notes that Nearmap estimates the market opportunity in its four countries of operation (Australia, New Zealand, United States, and Canada) to be worth $2.9 billion per year.

This means that the annualised contract value (ACV) that it expects to achieve in FY 2020 of $103 million to $107 million is just a ~3.6% share of its overall market. This gives it a significant runway for growth over the next decade.

Another reason it is positive on the company is the fragmented nature of the aerial imagery market. Goldman believes this gives providers such as Nearmap an opportunity “to scale across a broad range of industry segments (i.e. such as architecture, insurance, government, utilities, solar panel providers).”

A third reason is the company’s technology. The broker believes it is very competitive versus its domestic and global peers. It notes that its strengths include high quality image capture and market leading frequency of capture. It also notes that a substantial investment has been made to provide oblique and 3D imagery and artificial intelligence/machine learning driven analytical capability at scale.

Combined, the broker believes Nearmap is capable of growing its ACV by a compound annual growth rate of 18% between FY 2019 and FY 2022.

I think Goldman is spot on with its buy rating, but is potentially being a little conservative with its estimates. I expect the company to deliver on its target of at least 20% growth over the period.

Overall, I think Nearmap is a great buy and hold option along with the likes of Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Fortescue Metals Group Limited (ASX: FMG) share price is showing little signs of stress even as the miner faces compensation claims that could cost it hundreds of millions.

But investors aren’t perturbed by the news that the High Court denied the company special leave to appeal a Federal Court ruling.

The Fortescue share price is a rare riser on the S&P/ASX 200 Index (Index:^AXJO). The stock inched up 0.5% to $13.59 during lunch time trade while the top 200 benchmark shed 0.9% of its value.

The performance of the other major miners was mixed. The BHP Group Ltd (ASX: BHP) share price slipped 0.3% to $35.05 while the Rio Tinto Limited (ASX: RIO) share price added 0.6% to $94.16 at the time of writing.

What the court ruling means

The High Court defeat means that the earlier ruling that found Fortescue had built the Solomon iron ore mining hub without the permission of traditional owners will stick.

The traditional owners are represented by the Yindjibarndi Aboriginal Corporation (YAC) and the YAC is now expected to launch a multi-million-dollar compensation claim against Fortescue, reported the Australian Financial Review.

Big compensation bill

The court gave YAC exclusive native title rights over 2,700 square kilometres of iron ore-rich land in Western Australia’s Pilbara region.

The AFR reported that some in the community believe the size of claim should be based on a percentage of Fortescue’s total revenue of about $70 billion over the past decade.

You can see how even a small percentage can work out to be a big number.

Why investors aren’t worried

However, investors may be brushing this new development aside as it’s too early to quantify the impact of YAC’s claim.

The process might also take years to resolve if it’s dragged through the court system again.

In any case, the market may have already factored in some level of compensation that Fortescue has to cough up. The miner was backing the breakaway Wirlu-murra Yindjibarndi Aboriginal Corporation.

Further, the miner has previously downplayed the significance of any payout and said that the case does not affect its mining tenure rights or current operations.

Foolish takeaway

The Fortescue share price outperformed right through the COVID-19 market meltdown as its earnings and generous dividend handouts are resilient to the deep recession.

Such defensive qualities are hard to find in the current environment. This explains why the stock jumped 28% since the start of the year when the ASX 200 fell 13%.

More reading

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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