ONE announces US $2.4M contract, leveraging Samsung and Microsoft partnerships

Our investment Oneview Healthcare (ASX:ONE) is a health tech company that provides hospital patients a “virtual care and digital control centre” at their bedside to deliver the best possible patient experience during their stay.

ONE is our Tech Pick of the Year for 2021.

Today ONE announced a material new 5 year contract for 235 hospital beds worth $2.4M USD, with USA based hospital Kingman, using ONE's new cloud offering, as the first deal under the Microsoft co-sell agreement AND using Samsung tablets.

This deal single handedly ticks off THREE of the key investment milestones we wanted to see from ONE this year.

The Kingman Regional Medical Centre in Arizona is also part of the prestigious Mayo Clinic Care Network - a “select group of independent health systems that are granted special access to Mayo Clinic's extensive knowledge and world-leading medical expertise. Carefully vetted and selected for their commitment to high-quality patient experience”

The Mayo Clinic is ranked first in the United States in the U.S. News & World Report's 2019–20 Best Hospitals Honor Roll, maintaining a position at or near the top for more than 27 years.

45 major hospitals are part of the Mayo Clinic care network and ONE will now have a case study with one of them (Kingman) that they can show to the other 44, given the network’s key focus on the patient experience.

...not to mention another USA case study to start working into the lucrative and huge broader USA hospital market, which according to the American Hospital Association survey in 2019 contains 919,559 hospital beds across 6,090 hospitals.

To put it into perspective, in 2020 ONE was generating its $7.8M annual recurring revenue from just 9,259 hospital beds.... That’s only about 1% of the total hospital beds in the USA.

In our opinion today’s deal is a very important deal for ONE, and not just because of the large revenue component, but this deal hits several key proof points that we have been looking for since ONE launched its cloud offering in March and signed partnership agreements with Microsoft and Samsung:

• First big cloud deal - Critical proof point on ONE’s easy-to-deploy cloud version that was launched in March this year
• Materially large revenue number - USD $2.4M total deal size adds a nice chunk towards the revenue guidance
• First deal under Microsoft agreement - in our experience a fast first deal under a new partnership (especially this quickly after signing) usually means more to come.
• USA revenue - USA is a huge market (almost a million beds) where we want to see ONE gain more traction - this deal is a positive start
• Samsung tablets sold in the deal - Samsung sales reps (under the ONE/Samsung partnership) will be energised to focus on ONE sales now that they have seen a big quick win
• Connection to the Mayo Clinic Network - first deal with a hospital in the prestigious Mayo clinic network of 45 hospital systems - Mayo Clinic is the undisputed #1 Health System in the US

We originally invested in ONE because we liked its existing sales traction in hospitals around the world. On top of that we REALLY liked its newly launched cloud offering. ONE’s cloud offering could potentially accelerate its revenue using a “land and expand” sales strategy, as hospitals globally rush to digitise after the pandemic. Today’s new 5 year deal is a critical proof point and the revenue has far exceeded our expectations.

The key things we wanted to see from ONE in the first 12 months of our investment are shown here, and today's announcement ticks off THREE key milestones (highlighted in BOLD):

✅ Portfolio Initiation
✅ Cloudcare Experience Launches on Time
📅 Jan-Mar Quarterly 2021 (Keep costs stable, increase revenue 20%)
📅 Apr-Jun Quarterly 2021
📅 FY2021 Results
📅 [NEW] Double USA Revenue H1 2021
📅 [NEW] Double USA Revenue H2 2021 (from H1 2021)
🔲 First New Customer via Samsung Partnership
✅ New "Expand" Deal signed (upsell deal with existing customer)
✅ First New Cloud Customer in Australia
✅ First New Cloud Customer in U.S
🔲 Initiation of research coverage by mainstream broker|
🔲 Favourable Outcome in Regis Court Case
🔲 Multiple New Customers via Samsung Partnership
🔲 Multiple "Expand" Deal signed (upsell deal with existing customer)
🔲 Multiple "Land" Deal Signed (small new customer deal with upsell potential)
✅ First New Customer via Microsoft Partnership
🔲 Unexpected Announcement 1
🔲 Unexpected Announcement 2

Key points of today’s news:

1 Case study in the prestigious Mayo Clinic Network (45 Hospital systems)

The Mayo Clinic is top-ranked for quality more often than any other health care organization.

The Mayo Clinic shares its skills and knowledge with a network of 45 hospital systems across the USA - Kingman (ONE’s new client) is in this network.

Here is what we want to see happen:

1. ONE delivers an amazing rollout of cloud experience to Kingman
2. Kingman is very happy
3. Kingman shares its positive ONE experience as part of Mayo Clinic network knowledge sharing
4. A couple of other hospitals in the network join Kingman in using ONE
5. All the other hospitals in the Mayo Clinic network start to see how ONE is being used at early adopter hospitals and rush to sign on too

Nobody wants to go first: The first deal into a connected network is the hardest because nobody wants to take the risk of “going first” - Kingman has gone first so this is a big milestone for ONE, but still needs a smooth delivery for Kingman to be happy.

If ONE can impress Kingman, we think the second Mayo Clinic Network hospital will join too, then the third and when all the other hospitals see how amazing the ONE tech is for the first few hospitals using it... they will want to join too.

Here is a video representation of what we hope ONE can achieve in the Mayo clinic network (the first dancing guy is Kingman):

As demonstrated in the video, to attract the second and third hospital, it is crucial for ONE to deliver a great experience for Kingman so the other hospitals can see how awesome it is and get FOMO and want to join in too..

Here is the comment from Kingman CEO on the deal-sounds positive so far:

What we want to see NEXT: ONE to deliver successful rollout to Kingman, Kingman to do a case study/webinar on their usage of ONE

2 Adding more US revenue

Given the USA market size, it’s usually the prime target market destination for any tech company.

We like that the Kingman hospital deal adds more US revenue to ONE’s revenue mix.

We note that on page 14 of ONE’s interim financial reports that 54% of revenue is coming out of the USA, which is a key (and very big) market.

The USA is the biggest OECD market in the world, and ONE is evolving into a USA tech story. We want to see continued USA growth.

The market for patient experience tech like ONE’s is huge in the USA, and as we mentioned earlier - the American Hospital Association 2019 data shows 919,559 beds across 6,090 hospitals in the US alone:

What we want to see NEXT: More revenue and deals out of the USA

3 First Big (NEW) Cloud deal

ONE has been selling enterprise software to hospitals for many years...

Selling tech to hospitals is like selling to governments, airports or utilities - it takes ages, even years - it's very hard to get your foot in the door as these are big, complex organisations and are resistant to change.

You have to deal with the CEO, IT department, stakeholders etc and it’s usually a 12 to 18 month sales cycle... so you might as well go big and try to sell a huge amount of tech to make the time and effort worthwhile, which makes the deals expensive for the organisations too.

BUT - if you manage to convince these organisations to buy your tech they become VERY long term ‘sticky’ customers (because they are resistant to change).

Prior to our investment, the fact that ONE already grinded out $7.8M of Annual Recurring Revenue from 9,259 hospital beds was one of the key reasons that attracted us to make such a large investment in ONE - they have proven they can execute complex enterprise sales to large hospitals. The next step is to scale that up.

ONE’s new cloud platform has removed the need for an on premise server and allows ONE to make new sales way faster and easier for hospitals.

ONE’s new cloud platform allows them to launch a selling technique called “land and expand” and we will be watching closely over the next few months for early signs of success.

“Land and expand” basically means to LAND a customer by making a fast, small sale that is easy for the customer to execute (everyone loves fast and easy) and after the new customer sees how awesome the product is and they are happy, they can EXPAND it through their organisation (this is where the increased revenue comes in) - it’s a win-win for everyone.

As investors we wanted to see ONE prove that it could sell its new cloud product AND sell big deals. Today's announcement proves that cloud can be sold and high profile hospitals are comfortable with cloud - next thing we are watching for is confirmation that the cloud roll outs can be done fast and smoothly.

In the announcement ONE reckons the “go-live” date will be by December...yes, as in December THIS year - wildly fast for rolling out hospital tech.

What we want to see NEXT: Successful fast roll out of this deal. More big cloud deals

4 ONE products being “co-sold” via Microsoft’s cloud marketplace

Back in August, Microsoft welcomed ONE’s CXP Cloud Enterprise product onto its Azure Marketplace. The Azure Marketplace is Microsoft’s online store that provides apps and services for use on its Azure cloud platform.

At the time, ONE reported that:

“Cloud Enterprise is now transactable in Microsoft’s Azure Marketplace, meaning customers can buy via the Marketplace. This enables us to benefit from maximum co-sell focus from Microsoft, as well as enabling customers to count the cost of Oneview towards their Minimum Azure Consumption Commitments.”

This was a huge unlock for ONE, as Microsoft is a huge partner in the enterprise cloud market.

We have been watching closely to see the first customer generated through the Microsoft co-sell program - which was achieved today.

Like with the Samsung agreement - we are watching the progress of this partnership to contribute significant revenue growth.

What we want to see NEXT: ANOTHER deal through the Microsoft “co-sell” program, which will increase the likelihood of more to come.

5 Samsung Distribution Agreement

In February ONE signed a distribution agreement with Samsung SDS America, Inc., the enterprise IT solutions provider of Samsung, to offer a bundled solution for bedside digital services for patients in the United States.

Samsung SDSA will bundle Samsung tablets with Oneview Cloud Start – the first tier in ONE’s new product suite.

We like that today’s Kingman deal uses Samsung tablets - an early big sale in a partnership like this should energise the Samsung sales reps to see that the ONE + Samsung combo can be lucrative for them to put energy into as it can help them drive sales to get their bonuses.

What we want to see NEXT: We are watching out for Samsung to introduce ONE into some of its hospital deals

A few weeks ago: ONE investor briefing call

ONE hosted an investor briefing call a month ago to talk about their results from the first six months of the year and to provide guidance on what to expect over the next six months.

We sat in on the briefing and will today provide our key takeaways.

You can watch a recording of the 30 minute investor briefing call here.

For anyone new to investing, we believe that the most important thing to do is to take every opportunity to hear the management speak about the company’s progress, so you can form your own opinion of how well they deliver what they promise.

Since we have been following ONE they have delivered everything they promised they would, so we were very interested to hear them say what they plan to achieve over the next six months:

Or you can read our summary and opinion of the call here

REMINDER: What is Oneview Healthcare and why we invested

In March, we invested in ONE and added them to our portfolio as our 2021 Tech Pick of the Year. Here are the ten reasons we gave for investing in ONE, you can see our deep dive into each reason in our original note here: 10 reasons we invested in ONE.

Here are the headline reasons:

1. Great product for a hot sector - telehealth and health tech
2. Established tech company that is undervalued (*our opinion was that ONE was undervalued when we first invested in March 2021)
3. Board, management and shareholders all invested in the last round.
4. The product looks really good
5. Big Market: Growing need for virtual healthcare
6. Market Traction: Hospital uptake continues to grow
7. Profit margins expected to increase with continued moves to the cloud
8. Partnership with Samsung
9. Milestones and catalysts in 2021
10. Right sector, right tech, right time.

Our journey with ONE so far

In March 2021, we announced ONE as our Tech Pick of the Year for 2021.

This followed the success of our 2019 Tech Pick of the Year — WhiteHawk, which is up 300%, at 18¢; and Advanced Health Imaging (formerly MyFiziq) — our 2020 Tech Pick of the Year — which has risen from 11¢ to $1.29 today.

A few weeks later, we provided our deep dive analysis that outlined the 10 reasons that we invested in ONE.

Then, later that month, we revealed how we expect ONE’s new cloud offering to turbocharge growth of new hospital clients, hospital beds and recurring revenue.

In April, ONE released its quarterly results demonstrating its progress. Revenue was up 64% on the prior year, while costs were down a massive 84%. It also reported that a number of clients had renewed their contracts, a sure sign of confidence in the company and its technology.

Progress continued in May, when New York based hospital NYU Langone, one of the top 10 best hospitals in the USA, delivered an hour long webinar on the benefits they are getting from ONE’s technology. You can watch clips from that webinar here, or read the transcript.

After having only launched its cloud offering in March, by June, ONE had secured a five year contract with Victoria's largest private health service, Epworth HealthCare, for all 1,440 of its beds.

Just eight days later, ONE announced its second cloud deal, this time with Northern Health in Melbourne — another important proof point that ONE’s cloud strategy was working.

Lastly, in late-July, ONE (unsurprisingly) reported another quarter of strong growth, which proved to be much better than our expected milestones for the company.

ONE is reporting Environmental, Social and Governance (ESG) disclosures and progress

Best in class ESG companies attract more capital, better customers and top talent – this leads to better shareholder returns over time - ONE discloses its ESG progress and improvements on a quarterly basis.

Oneview Healthcare Company Milestones

✅ Portfolio Initiation
✅ Cloudcare Experience Launches on Time
📅 Jan-Mar Quarterly 2021 (Keep costs stable, increase revenue 20%)
📅 Apr-Jun Quarterly 2021
📅 FY2021 Results
📅 [NEW] Double USA Revenue H1 2021
📅 [NEW] Double USA Revenue H2 2021 (from H1 2021)
🔲 First New Customer via Samsung Partnership
✅ New "Expand" Deal signed (upsell deal with existing customer)
✅ First New Cloud Customer in Australia
✅ First New Cloud Customer in U.S
🔲 Initiation of research coverage by mainstream broker
🔲 Favourable Outcome in Regis Court Case
🔲 Multiple New Customers via Samsung Partnership
🔲 Multiple "Expand" Deal signed (upsell deal with existing customer)
🔲 Multiple "Land" Deal Signed (small new customer deal with upsell potential)
✅ First New Customer via Microsoft Partnership
🔲 Unexpected Announcement 1
🔲 Unexpected Announcement 2

Investment milestones

ONE was the biggest initial investment we made to date. ONE has delivered several impressive announcements and is up over 500% since we first invested. Like we did with VUL after it delivered a number of material announcements and rose over 500%, we sold a small portion of our holding to recoup our initial investment. Our plan now is to hold the remaining position as the ONE continues to execute on its plan over the next few years.

ONE is currently our third biggest holding after VUL and PRL. For more information on our investment strategies see our ebook

✅ Initial Investment: @ 6c
✅ Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
🔲 Price increase 2000% from initial entry
🔲 12 Month Capital Gain Discount
✅ Free Carry
🔲 Take Profit
🔲 Hold remaining Position for next 2+ years