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Financing Lets Cloud Tech Co. Keep Foreign Status With NASDAQ
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A bought deal financing for CA$6 million is expected to maintain technology company's Canadian ownership for its Foreign Private Issuer (FPI) status.

A bought deal financing for CA$6 million is expected to maintain Quisitive Technology Solutions Inc.'s (QUIS:TSX.V) Canadian ownership for its Foreign Private Issuer (FPI) status with NASDAQ, analyst Rob Goff reported in a June 26 research note for Echelon Capital Markets.

The financing offers 17.2 million common shares at CA$0.35 per share. The underwriters have been given an overallotment option which could push the transaction, expected to close in July, to CA$6.9 million.

Annual measurement for the cloud technology company's FPI status is taken on June 30. Losing the status would have required the company to take on a U.S. auditor.

"We moved our (price target) to CA$1.25, reflecting a higher cost of capital given current market conditions and interest rates," Goff wrote, rating the stock a Speculative Buy.

"Looking forward, we believe expectations leave upside against double-digit organic growth prospects from IT Services and BankCard before considering the emerging contribution of PayiQ as its EBITDA drain turns around and revenue traction gains momentum exiting 2023," Goff wrote. "We look for QUIS to re-engage its inorganic growth aspirations within the next 12 months."

Employee Buying Contributed to Shift

Goff said QUIS employee buying of shares contributed to the ownership shift that threatened its FPI status. The company indicated it would use a portion of the proceeds to repurchase BankCard sales trailer fees, which represent payments to BankCard sales representatives for the ongoing business of clients.

Goff said Echelon continues to see QUIS as undervalued against consolidated valuations.

"QUIS is currently trading at 6.5x EV/NTM EBITDA, modestly above its three-year low of 5.9x," Goff noted. "We highlight that PayiQ represents an appreciating asset within QUIS where arguably consolidated valuations imply a negative by not factoring its EBITDA drain of (CA)$6 (million). Our consolidated 2023/24 EV/EBITDA valuation at 6.3x/5.0x would move to 5.2x/4.3x excluding the start-up costs associated with the PayiQ launch."

Cloud-Enabled Payment Platform Gaining Traction

PayiQ is the company's new cloud-enabled payment-processing architecture. Its commercialization is gaining traction entering 2024, Goff said, and he looks for investors to focus on the migration of BankCard merchants onto the platform, in addition to new clients.

Migration revenues could contribute as much as CA$5 million of PayiQ's revenues at more than 85% gross profit over the next 24 to 36 months, Goff wrote.

"We continue to see the potential for QUIS to acquire ISOs at 10x EV/EBITDA or 6-7x adjusted for savings upon migrating payments onto the PayiQ platform," Goff wrote. "Over the longer term, accretive IT Services acquisitions are expected to add shareholder value as QUIS leverages revenue synergies and scale efficiencies."

PayiQ commercialization into 2024 should focus investor attention on the potentially redefining upside of the platform, according to the note.

"We look for further contracts for IT Services to facilitate QUIS gaining scale and leverage while showcasing double-digit organic growth," Goff wrote. "We continue to look for positive read-throughs from the global cloud providers indicating strength in cloud demand."

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Important Disclosures:

  1. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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Disclosures for Echelon Capital Markets, Quisitive Technology Solutions Inc., June 26, 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.

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For U.S. persons only: This research report is a product of Echelon Wealth Partners Inc, under Marco Polo Securities 15a-6 chaperone service, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

Research reports are intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a-6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Echelon Wealth Partners Inc. has entered into a chaperoning agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo").

Transactions in securities discussed in this research report should be affected through Marco Polo or another U.S. registered broker dealer.

ANALYST CERTIFICATION: I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. 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: Is this an issuer related or industry related publication? Issuer

Does the Analyst or any member of the Analyst’s household have a financial interest in the securities of the subject issuer? If Yes: 1) Is it a long or short position? None; and, 2) What type of security is it? No position

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