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Strong Q1/23 Points to Co. Turning EBITDA Positive Later in Year

Source: Mike Stevens

April 13, 2023 (Investorideas.com Newswire) The U.S.-based software firm is "beginning to stack early wins and momentum," noted an Echelon Capital Markets report.

HS GovTech Solutions Inc. (HS:CSE; HDSLF:OTC), having landed new contracts, clients, and markets, cut costs, and improved efficiencies in Q1/23, is on track to turn EBITDA positive toward the end of this year, reported Echelon Capital Markets analyst Mike Stevens in an April 6 research note.

"We are encouraged with another positive update," Stevens wrote, "as HS GovTech continues to execute toward its 2023 goals of reaching US$8-10 million ($8-10M) in annual recurring revenue and, perhaps more importantly, turning EBITDA positive."

HS GovTech develops and sells to governments software-as-a-service applications for managing data and communications.

186% Projected Return

Stevens highlighted that the North Carolina-headquartered company offers investors a significant potential return of about 186%. This is shown in the gap between HS GovTech's current share price of about CA$0.28 and Echelon's target price on the firm of CA$0.80 per share.

Echelon rates the technology firm Speculative Buy.

Q1/23 Achievements

In his report, Stevens presented the highlights of HS GovTech's update for Q1/23:

1) The company generated US$6M worth of contracts in Q1/23. Full execution of these should boost annual recurring revenue (ARR) to about US$6.8M, which compares to about US$6M in ARR at year-end 2022.

2) HS GovTech penetrated the market in three additional states: Montana, New Jersey, and Nevada.

"The prospect for follow-on business represents a meaningful opportunity across the board," Stevens commented.

3) The company took 12 clients live. Deployments in all of 2022 totaled 27, 11 of which were in Q4/22.

4) HS GovTech decreased in gross annual payroll by not adding any new positions. This contributed to the company saving about US$1M in annualized costs.

"The Company's progress with increasing project deployment efficiencies is a very encouraging trend toward scaling profitably and turning EBITDA/cash flow positive," wrote Stevens.

5) HS GovTech continued rapidly expanding its number of HSPay customers. HSPay is its online and mobile payment platform for government revenue collection. At the end of Q1/23, the average total processed volume was up to US$87,000 ($87K) per week versus US$25K per week in late December 2022.

"The trajectory is certainly noteworthy and could emerge as a more meaningful revenue contributor over the next couple of years," wrote Stevens.

Expectations in 2023

For Q1/23, Echelon estimates HS GovTech revenue of US$1.9M, gross profit of US$1.5M, and EBITDA of (US$0.8M), Stevens noted, and all three should build throughout the year. The broker-dealer expects the North Carolina firm will see in 2023 about a US$1M increase in cash operating expenses but also, topline growth of 57%.

Echelon also forecasts the software company will turn EBITDA positive in Q4/23 and, for the full-year of 2023, generate US$9.5M in revenue and achieve US$7.6M in gross profit.

As far as the tech firm itself relayed Stevens, management said it aims to close at least US$20M in total contract value this year, which should equate to about US$9M in annual recurring revenue.

"Notably, if HS GovTech continues to execute on its annualized trajectory, we expect the company to outperform our forecasts," Stevens commented.

Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: None. Please click here for more information.

3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of HS GovTech Solutions Inc., a company mentioned in this article.

Disclosures For Echelon Capital Markets, HS GovTech Solutions Inc , April 6, 2023

Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.

Research Dissemination Policy: All final research reports are disseminated to existing and potential clients of Echelon Wealth Partners Inc. simultaneously in electronic form. Hard copies will be disseminated to any client that has requested to be on the distribution list of Echelon Wealth Partners Inc. Clients may also receive Echelon Wealth Partners Inc. research via third party vendors. To receive Echelon Wealth Partners Inc. research reports, please contact your Registered Representative. Reproduction of any research report in whole or in part without permission is prohibited.

Canadian Disclosures: To make further inquiry related to this report, Canadian residents should contact their Echelon Wealth Partners professional representative. To effect any transaction, Canadian residents should contact their Echelon Wealth Partners Investment advisor.

U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.

ANALYST CERTIFICATION Company: HS GovTech Solutions Inc. | HS:CSE

I, Mike Stevens, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities orissuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.

Important Disclosures:

During the last 12 months, Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer.

During the last 12 months, Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer.

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