Dear Alphastox Subscribers,
There’s going to be a very exciting company with tremendous upside potential that’s going to start trading Monday under the symbol HS on the CSE and I wanted to make sure everyone had a chance to hear about it first. But before we get into the details of the company, I want to be very clear and let everyone know that I personally invested in this company at $0.20/share privately over six months ago because of the merits of the company, management’s vision and track record and their growth trajectory. I think we have a huge opportunity on our hands and I wanted to bring it to your attention right away.
HealthSpace is a government SAAS company that provides enterprise and mobile solutions for health agencies focusing on building better public and environmental health protection systems across North America. The company currently has over US $2 million in annual recurring revenue through 300 state and local government contracts and that number is set to grow exponentially over the next few years.
14 years’ worth of data management experience is evidence enough that this company isn’t going anywhere. Only 1 client in the past 14 years hasn’t renewed their contract - obviously an astounding statistic which proves the stickiness of each contract and demonstrates the loyalty of their client base. The great thing here is that once a contract is approved and included in a clients’ municipal budget, it rolls over year after year since it becomes an ongoing necessity.
As the company looks to take advantage of new technology opportunities in the space, what’s going to set this company apart is the fact that HealthSpace is the only company in its industry to offer a mobile app. This, as well as a recent push towards data monetization has positioned the company for significant top-line and margin growth over the next twelve months.
The new mobile app called HS Touch is expected to increase the company’s recurring revenue by US$1.25 million a year within the next 18 months just from their existing client base! The mobile flexibility gives HealthSpace a unique advantage amongst its peers as it allows inspections to be done in the field, something that no other company offer can at the moment. Additionally, it can work with competitors’ enterprise systems; it also decreases customization dramatically which increases their margins to that of most SAAS companies which sit at around the 65%+. What this means is that HealthSpace can now turn at client on within 24 hours – a task that used to take about 3 months. The demand for the app has grown drastically over the last short while to over 4,000 health departments in North America so far!
In terms of data monetization, HealthSpace is currently in discussions to make this plan a reality. Once approved, this initiative is expected to yield over US$2 million in revenue in the first year. Their revenue so far consists of 27,000 restaurant inspection reports per month that the company produces. The goal is to increase that number to over 100,000 inspections per month within the next twelve months and they feel it’s a realistic goal to reach once they launch their mobile app. At a minimum of $10 fee per inspection report sold, the estimated value of monetizing their data is expected to be around $500,000 per month with 90% margins!
Another department that I think could easily help HealthSpace drastically increase its revenue is the department of Agriculture. The FDA requires states to conduct a specific new federal inspection for food processing facilities if they want to qualify for a specific grant. HealthSpace is the only company so far to have already incorporated all of the requirements put forth by the FDA, so for any state that wants to qualify for the grant, they have to use the HS Touch. This is an incredible opportunity that is expected to bring in another US$2 million in upfront setup fees, and an additional US$1.5 million in annual recurring revenue.
As you can see by the different initiatives and opportunities, the company boasts a strong sales pipeline of approximately US$30 million that is expected to grow each month.
As a leading provider of data management services to municipal Environmental Health departments, HealthSpace has a tremendous opportunity to become one of the darling child’s of the CSE. HealthSpace looks to remain the only public company in the space through strategic acquisitions and will use their stock price as a currency to continue to move forward. As they look to increase revenue and their bottom line, there’s no doubt in my mind that another much larger tech company in the space will look to take them over. The one thing I love about profitable companies with high margins is that free cash flow is always worth something, no matter what market we’re in. The only thing that will change is the multiple someone is willing to pay for it and unlike a pure speculative play, HealthSpace has a real intrinsic value to it.
Looking into their team I have to say I am extremely comfortable and excited to have Ali Hakimzadeh as its Chairman. I’ve done business with Mr. Hakimzadeh in the past and I can tell you first hand he’s a man I trust and I love the passion, expertise and vision he brings to the team. He’s a very successful investment banker who knows how to build shareholder value and that’s exactly what he plans to do with HealthSpace. Working alongside his partners for the last few years, I have no doubt that HealthSpace will be a very exciting company to watch over the next six to twelve months so make sure you stay tuned!
As I said before, HealthSpace should start trading tomorrow under the symbol HS on the CSE so make sure you put it on your radar screen right now.
As always, if you have any questions, please do not hesitate to get in touch with me anytime. I look forward to hearing from you.
Best,
Etienne
Disclosure: Transcend Capital Inc. is a shareholder of HealthSpace