Governments Will Benefit from HS GovTech's Technology

HS GovTech (CSE: HS, OTC: HDSLF, FRA: 38H) emerges as a leading provider of SaaS applications for governments in Canada and the US. Despite a recent decline in its stock price, the company has made significant strides in increasing revenues, reducing expenses, and securing new contracts. Let's delve into the factors that have led to its underappreciated valuation.

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Sector Overview

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The global government cloud market was valued at USD 26.79 billion in 2021, and it is anticipated to witness a compound annual growth rate (CAGR) of 17.75% to reach USD 99 billion by 2030. Government clouds refer to virtualization and cloud computing platforms specifically designed for governmental organizations. This sector is driven by factors such as population growth, new policies and initiatives, collaborations, and a rising GDP resulting from the surge in new firms. Traditional legacy systems are becoming outdated and inefficient, necessitating the adoption of government cloud solutions. Vendors now offer public, private, and hybrid cloud options to cater to the administration, security, backup, and compliance needs of governments. This technological advancement is touted as the "next big thing" in the industry, with services categorized as Infrastructure-as-a-Service, Platform-as-a-Service, or Software-as-a-Service based on their delivery models.

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Company Overview

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HS GovTech, with 23 years of experience, leads the market in providing web-based and mobile solutions to health and safety regulatory agencies in North America. The company is dedicated to enhancing the effectiveness of government regulatory organizations, particularly those responsible for inspections and permitting. With over 300 years of collective expertise, the HS GovTech team strives to offer solutions that enhance transparency, effectiveness, and public service delivery within allocated budgets. Their innovative product platform, "HS Cloud Suite," combines cutting-edge cloud-based technology with mobile app functionality for field operations.

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The company also owns HS Pay, an online mobile payment platform that offers a unified solution for government revenue collection. According to a news release from March 2, HS GovTech's Third Party Verification for this solution has surpassed the processing volume of 2022. The average Third Party Verification has increased to $75k per week, up from $25k per week reported on December 21, 2022.

HS GovTech's mission is to revolutionize government regulatory work, streamlining processes such as licensing, permitting, inspections, invoicing, accounting, and disease surveillance.

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Share Structure / Financials

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HS GovTech's financial statements for the period ending September 30, 2022, revealed $631k in cash, $7.2M in total assets, and $2.6M in total liabilities. The company generated $1M in revenue for the quarter but remained unprofitable. High costs, including implementation expenses ($793k) and general administrative costs ($736k), contributed to the financial situation.

The company has secured significant contracts, exemplified by a $9.4M (USD) contract over eight years announced on September 7, 2022. This contract includes annual recurring revenue (ARR) of $1,074,073 per year, excluding HSPay revenue, and professional services and implementation fees of $801,000. Additionally, HS Pay will serve as the processor for all online electronic payments in this contract.

The company is witnessing positive sales momentum, with a total contract value (TCV) of $5.7M as of mid-Q1. This potentially positions HS GovTech to achieve profitability by the end of the year. Future earnings and contract acquisitions will be crucial in assessing HS GovTech's trajectory.

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HS GovTech recently closed a financing round, raising $2.4M through the issuance of 5.6M shares at $0.37 per share. Each share is accompanied by a $0.50 warrant. The funds raised from this financing will be allocated towards sales, marketing, research and development, working capital, and general corporate purposes.

As of March 6, 2023, HS GovTech has 53.2M shares issued and outstanding. Additionally, there are 17.6M warrants and 3.6M options & Restricted Share Units available.

Despite the current stock price trading near its 52-week low of $0.25, with a 52-week high of $0.74, the recent positive developments have yet to impact the share price significantly.

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Conclusion

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In conclusion, HS GovTech (CSE: HS, OTC: HDSLF, FRA: 38H) has demonstrated promising revenue growth, highlighted by a $5.7M total contract value (TCV). With recent financing, the company is well-funded, and there is optimism for HS GovTech to reach breakeven by the end of the year. However, it remains essential to closely monitor the company's expenses and the acquisition of new contracts. Future earnings reports will provide valuable insights into the direction of HS GovTech.

Governments stand to benefit significantly from the technology offered by HS GovTech, which aims to revolutionize various aspects of government regulatory work. The company's innovative solutions streamline licensing, permitting, inspections, invoicing, accounting, and disease surveillance, providing ease and efficiency to government workflows. As the government cloud market continues to expand rapidly, HS GovTech's expertise and SaaS applications position it favorably to cater to the evolving needs of government agencies in Canada and the US.

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