ONE seals $20M raise, $2M SPP to come

Our healthtech Investment and 2021 Tech Pick of the Year Oneview Healthcare (ASX: ONE) announced it has undertaken a $20M raise today.

With a $2M Security Purchase Plan (SPP) to follow, we see this raise amount as a good sign of the growing and strong institutional support for ONE, which now has an excellent runway to execute on its US growth plans.

The raise was at what we see as a relatively tight discount (9.38% to last traded price) for the amount raised ($20M) - 29c a share.

Prior to entering a trading halt for the raise, ONE released a new investor presentation which included some good insights into how ONE is tracking.

Below is a good summary of why we are Invested in ONE:

(Source)

We’ve been patient with ONE and have seen it progressively march up the charts as it continues to grow its total contracted beds - it is one of our best (and most consistently) performing Investments.

Ever.

Part of why ONE has done so well is that it has sticky long term customers in a hard to penetrate market - the US healthcare market.

But we’re really looking towards the blue sky for ONE now - with two important prongs to its efforts to make major headway in the US.

First, there’s the highlighted Baxter Agreement in the above slide - and its potential to materially reduce the sales cycle for ONE could be a major source of upside.

The Baxter agreement - which ONE recently extended to 2027 and now includes the Canadian market, gives ONE access to potentially +500,000 US hospital beds to sell into (not including Canada).

This slide was also key for us:

(Source)

We want to see ONE keep its cash burn in check - and the Baxter agreement shifts project management of implementations to Baxter.

We think this is a good match - Baxter gets a great product, ONE gets the sales team and workforce needed to scale.

Second, is the My Stay mobile product which looks like this:

(Source)

MyStay is ONE's product that provides hospital patients with a virtual care and digital control center at their bedside - importantly on their own device.

We believe MyStay, combined with ONE's Baxter Value Added Reseller agreement, could unlock rapid recurring revenue growth and help ONE scale in the US market.

Read more on this in our recent note on ONE below:

First deal for ONE’s new mobile product. Baxter relationship now "Internet official"

How does this news impact our ONE Investment Memo?

This was ONE’s fifth raise since listing in 2016, and it was well supported with $20M. We hope this is ONE’s last raise before achieving sustained operating cashflow positive status. We see funding risk as strongly mitigated over the medium term.

Funding risk

Although ONE raised $20M in July 2023, growth companies need cash to achieve their goals. If ONE doesn’t use the money from this raise wisely, then share price pain could follow. This was ONE’s fourth capital raise since it listed in 2016.

Source: 22 September 2023 ONE Investment Memo

What’s next for ONE?

More contracted beds and a transition to the more smoothed out revenue streams of a true SaaS model with MyStay.

We want to see ONE hit 25,000 beds - it’s our number one objective for ONE in our ONE Investment Memo.

We think by hitting all the objectives in that Investment Memo it will move ONE closer to realising our ultimate upside scenario for our ONE Investment, our ONE Big Bet:

Our ONE Big Bet:

ONE will sign on enough new hospital beds at an accelerating rate to achieve a $1Bn valuation (based on 5x to 10x forward ARR multiple) and be acquired by a large health tech provider.

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved, and it will require a significant amount of luck. There is no guarantee that it will ever come true. Some of these risks we list in our ONE Investment Memo.

We’ll be looking out closely for ONE to seal the remaining contracts in late stage negotiations and start to see Baxter’s 100 person strong salesforce deliver results.