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The US government can peg Treasury rates unilaterally to fight the "war" on COVID, irrespective of big changes in inflation expectations, as it did during World War II

Research

View above about Model Issue: USD yield curve control?

It’s worth understanding the mechanics of how the Fed kept rates down despite all the pressure for them to rise. It did that via yield curve control, which kept interest rates anchored even when there were massive shifts in growth, inflation, and government bond issuance. In the charts below you can see how long-term bond yields stayed stable around 2% through the huge economic swings of the war (with its massive growth boom and the price controls required to keep inflation from skyrocketing), the postwar slump, and the recovery that followed. Inflation reached a postwar extreme of close to 20% in 1947 and a low of about -3% in 1949, while yields barely budged.
linkedin.com

The Mechanics of the War Economy

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We see a 35% chance that HVR will produce >$600 million of cash over the long term, and a 10% chance it makes >$2.8 billion

Analysis

View above about Model Issue: HVR Equity Value

With our judgments for key drivers, together we produce many scenarios for long-term cash flows. For example, we see a ~35% chance this company will produce more than $600 million of cash over the long-term, which it could do if it’s One of a Few alternatives in its first three target markets. To read the table below on a smartphone, flipping to landscape may help. Then drag the dot at the top to the 90th percentile to see why we see a 10% chance it makes more than $2.8 billion!
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We see a 90% chance HVR's forward revenue multiple in 2 years is higher than Healthstream's and a 75% chance it is higher than Vocera's

Analysis

View above about Model Issue: HVR Equity Value

Research Category: Valuation for HVR, Inc.
We can even produce scenarios for expectations for those long-term cash flows by other investors in the future, such as in 2 years. Here we see 100 scenarios for those expectations for cash balance. Those expectations in 2 years will influence multiples in 2 years, and our odds for the expectations enable us to handicap odds for multiples. In 2 years, we see an >90% chance that HVR’s revenue multiple is above 2.5x, Healthstream’s multiple today. We see a >75% chance that investors will pay a multiple greater than Vocera, which currently trades at 4.4x. By hovering dots around a chosen multiple, we can see investor expectations for Growth, Profitability & Scale. By estimating odds of those stories, we can estimate odds of exit multiples, which is much more useful than just looking at a wide range of multiples in a data table with no explicit odds for either end of the range.
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We see a 10% chance of a > 25x return on HVR and a roughly 50% chance of losing money over 5 years

Analysis

View above about Model Issue: HVR Equity Value

Research Category: Valuation for HVR, Inc.
Our story-driven odds for investors’ outlook for this company at various future horizons help us produce odds for its valuation at various future horizons. We see a 10% chance it is more than 25x today’s value in 5 years, with an equity value around $700 million. On the other hand, we see about a 50% chance of losing money and almost that much chance of losing more than 50%. If we had diversified investments like this in a portfolio, we would expect it to return the mean of ~6.7x over 5 years. These odds can help us weigh better whether and how much to invest in this company, and with what deal structure.
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Our odds for HVR are driven by judgments for peak economics influenced by different levels of differentiation in different addressable markets

Research

View above about Model Issue: HVR Equity Value

Research Category: Input Table for HVR, Inc.
The table below summarizes the main judgments driving our odds of future HVR financial results and investor returns. Each of these judgments is supported by research attached directly to it, and you can view that research in the posts that follow. If you have a log-in to BPN Writer, our research and modeling software environment, you can click the table below to open it in BPN Writer. Then you can open the research supporting each cell, and you can change any of the cells yourself and recalculate the odds for financial results and returns, which you can then explore in tens of interactive charts, each with a different perspective on your updated cases for the future.
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HVR's product may enable the effectiveness of in-person simulation at the efficiency of online learning

Research

View above about Model Issue: Our odds HVR is One of a Few alternatives for OR-High Risk

Research Category: Product Features and Roadmap for HVR, Inc.
Our VR offers 10x efficiency improvement vs. in-person simulation and 250% learner performance improvement over eLearning.
cl.ly

Why VR Solves the Problem

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Vanderbilt's nursing head says 15-20% of trainings could be best in VR

Research

View above about Model Issue: Our odds HVR is One of a Few alternatives for OR-High Risk

Research Category: TAM and Industry Trends for HVR, Inc.
Across all training courses, my guess is 75% of them can continue to be done on Learning Management System platforms. For example, the annual state required coursework doesn’t need a VR simulation. The remaining 25% are face-to-face simulations. Of that 25%, maybe 80% (or about 15-20% of total) could potentially be done using HVR.
google.com

Diligence Call Notes

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More and more nurses are millenials, who like new technology

Research

View above about Model Issue: Our odds HVR is One of a Few alternatives for OR-High Risk

Research Category: TAM and Industry Trends for HVR, Inc.
In general, nurses tend to be more visual learners. They like to touch and feel. And more and more nurses are millennials that want to be involved and connected. Millennial nurses would love using HVR.
google.com

Diligence Call Notes

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It's hard to find time for nurses to do in-person training but online training isn't enough

Research

View above about Model Issue: Our odds HVR is One of a Few alternatives for OR-High Risk

Research Category: TAM and Industry Trends for HVR, Inc.
One of the biggest challenges as a manager is finding the time for a nurse to complete the competency coursework. A nurse already has a jam packed schedule in their 12 hour shifts. They often receive additional paid time coming in on their days off to fulfill the requirements. Training is performed via online learning as well as face to face simulations, which are essential from a skills development perspective. A nurse can read as much as possible but once they come face to face with a high pressure, life threatening situation, the health system needs to have comfort in knowing they understand the algorithmic approach to handling those events.
google.com

Diligence Call Notes

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HVR is only one of four companies that offer software for managing training simulations

Research

View above about Model Issue: Our odds HVR is One of a Few alternatives for OR-High Risk

Research Category: Product Features and Roadmap for HVR, Inc.
There are basically 4 companies that offer software for managing training simulations: HVR, CAE, Beeline, and EMS. But the 3 others are mainly camera companies who got into simulation when it was based on video and people needed someone to help them manage creating and organizing the videos themselves. As a result, the software isn't good for helping manage the doctors' and nurses' training. Our founder was frustrated as a doctor and so learned to code and started writing our software to manage this from the dr's and nurse's perspective. We have that and are now adding VR content to it.
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VR training is becoming more common to educate workers or assess their ability

Research

View above about Model Issue: Our odds HVR is One of a Few alternatives for OR-High Risk

Research Category: TAM and Industry Trends for HVR, Inc.
The country’s largest private employer is using a VR skills assessment as part of the selection process to find new middle managers, watching how workers respond in virtual reality to an angry shopper, a messy aisle or an underperforming worker. VR training is becoming more common in a variety of industries to educate a large number of workers quickly or assess the technical ability of high-skilled workers like electricians or pilots. But Walmart’s use of the technology to gauge a worker’s strengths, weaknesses and potential is significant because it pushes VR evaluation out to a massive hourly workforce and in some cases helps determine who gets raises and who gets demoted.
wsj.com

Diligence Call Notes

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HVR competitor Osso VR recently raised $14M, led by healthcare system Kaiser Permanente, in a bid to improve virtual surgical training for doctors

Research

View above about Model Issue: Our odds HVR is One of Many alternatives for OR-High Risk

Research Category: Competitors and Pricing for HVR, Inc.
Osso VR currently has around 30 customers, 12 of which are in the medical device space. The company uses Oculus Quest headsets and is deployed in 20 teaching hospitals across 20 different countries. In a recent validation study, surgeons training with Osso VR showed a 230% improvement in overall surgical performance, the company said in a statement. The goal, according to Barad, a lifelong coder with a game development credit from Activision/Blizzard, is to democratize healthcare. “This is about improving patient outcomes, democratizing access and improving education,” said Barad. “Now that the technology is growing and maturing and VR is growing as a platform, we can attack the broader problems in healthcare,” he said.
techcrunch.com

Osso VR raises $14M to bring VR to surgical and medical device training

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Journal of Nursing Regulation suggests 3.9M registered nurses in US, and there could be as many as ~225K perioperative nurses

Research

View above about Model Issue: Prospective subscriptions for OR-High Risk

Research Category: TAM and Industry Trends for HVR, Inc.
In the current study, 14% of RNs reported their primary practice specialty was acute care/critical care compared to 11.4% in 2015. The second most frequently selected specialty was medical-surgical; 8.5% of RN respondents selected this specialty in 2017 compared to 10.1% in 2015. Perioperative was the third most frequently selected specialty by 5.8% of 2017 respondents. RNs selecting other specialties (14.1%) represented a decrease from 17.0% in 2015.
journalofnursingregulation.com

The 2017 National Nursing Workforce Survey

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There are >160K perioperative nurses in the US

Research

View above about Model Issue: Prospective subscriptions for OR-High Risk

Research Category: TAM and Industry Trends for HVR, Inc.
AORN, Inc., represents the interests of more than 160,000 perioperative nurses and provides nursing education, standards, and services that enable optimal outcomes for patients undergoing operative and other invasive procedures. Our over 41,000 registered nurse members facilitate the management, teaching, and practice of perioperative nursing education, or are engaged in perioperative research. Our members also include perioperative nurses who work in related business and industry sectors.
aorn.org

AORN Facts - Association of periOperative Registered Nurses

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The ~110K surgical techs in the US can also take OR - High Risk VR courses

Research

View above about Model Issue: Prospective subscriptions for OR-High Risk

Research Category: TAM and Industry Trends for HVR, Inc.
Surgical technologists assist in surgical operations. Most surgical technologists work in hospitals. They spend much of their time on their feet. Surgical technologists typically need a postsecondary nondegree award or an associate’s degree. Certification can be beneficial in finding a job. A small number of states regulate surgical technologists. Employment of surgical technologists is projected to grow 7 percent from 2019 to 2029, faster than the average for all occupations. Advances in medical technology have made surgery safer, and more operations are being done to treat a variety of illnesses and injuries.
bls.gov

Surgical Technologists : Occupational Outlook Handbook: : U.S. Bureau of Labor Statistics

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