(NASDAQ:HTCR),
Q3 2024 Revenues Increased 281% to $17.9 Million
Q3 2024 Net Income Increased 526% to $10.8 Million
NEW YORK and TOKYO, Nov. 14, 2024 (GLOBE NEWSWIRE) — HeartCore Enterprises, Inc. (Nasdaq: HTCR) (“HeartCore” or “the Company”), a leading enterprise software and consulting services company based in Tokyo, reported financial results for the third quarter ended September 30, 2024.
Third Quarter 2024 and Recent Operational Highlights
- Regained compliance with Nasdaq Listing Requirements
- Expanded CMS platform offering into a SaaS delivery model
- Entered into a sales collaboration with Tosho Computer Systems Co., Ltd.
- Announced transition from annual contracts to multi-year agreements for core software business contracts
- Partnered with NTT Data Business Brains Corporation to enhance website development service capabilities
- Achieved top market share in Japan for nine consecutive years
- Awarded new contract from Fourmix Co., Ltd. to implement CMS platform
- Announced Go IPO Client, SBC Medical Group Holdings Incorporated, began trading on the Nasdaq Stock Exchange
- Partnered with INCUDATA Corp. to enhance corporate digital marketing strategies
- Announced Go IPO Client, BloomZ Inc., began trading on the Nasdaq Stock Exchange
- Authorized second dividend payment of $0.02 per share
- Partnered with Hitachi Systems, Ltd. to offer combined package of HeartCore CMS and GRED Web Security Assessment Cloud
Management Commentary
“I am pleased to announce the strongest quarter of HeartCore's history, supported by the progress made across our Go IPO business,” said HeartCore CEO Sumitaka Kanno. “The third quarter saw two new Go IPO clients successfully listed on the Nasdaq. The warrants and ordinary shares received from these deals contributed to our highest financial results since the inception of the service, driving us into profitable operations for the quarter and year-to-date. This quarter's results showcased the immense value of our consulting business, and with an optimistic outlook on the U.S. IPO market for Japanese companies, we anticipate closing additional deals over the next several months that will further support the growth of our Go IPO business. We continue to remain in serious discussions with prospective Go IPO clients and look forward to sharing future wins as they come.”
“We also accomplished key developments in our software business, positioning us for sustained and predictable growth in the coming quarters. First, we transitioned towards offering multi-year software licensing agreements to our customers, a move designed to generate recurring revenue streams and enhance our margin profile. Furthermore, we added a SaaS delivery model for our CMS platform designed to support our sales and marketing team to tap into a new pool of prospective customers. While Go IPO contains the prospect of significant upside, our adjustments in the software business model are intended to create more stable, durable, and long-term revenue for future quarters. We look forward to continuing driving growth across both arms of the business and carrying this momentum into 2025.”
Third Quarter 2024 Financial Results
Revenues increased 281% to $17.9 million compared to $4.7 million in the same period last year. The increase was primarily due to revenue from warrants and ordinary shares associated with the successful listing of two Go IPO consulting service clients.
Gross profit increased 1,640% to $14.4 million compared to $0.8 million in the same period last year. The increase was primarily due to the aforementioned reason above.
Operating expenses decreased to $2.3 million compared to $2.6 million in the same period last year. The improvement was primarily due to lower selling, general and administrative, and research and development expenses.
Net income increased 526% to $10.8 million or $0.53 per diluted share compared to a net loss of $2.5 million or $(0.11) per diluted share, in the same period last year.
As of September 30, 2024, the Company had cash and cash equivalents of $1.2 million compared to $1.0 million on December 31, 2023.
Nine-Months 2024 Financial Results
Revenues increased 46% to $27.0 million compared to $18.5 million in the same period last year. The increase was primarily because revenue recognized from warrants and ordinary shares associated with the successful listing of two Go IPO consulting service clients in current periods was greater than that of recognized in the nine months ended September 30, 2023.
Gross profit increased 117% to $17.3 million compared to $8.0 million in the same period last year. The increase was primarily due to the aforementioned reason above.
Operating expenses decreased to $7.3 million compared to $8.9 million in the same period last year. The decrease was primarily due to lower selling and general and administrative expenses.
Net income increased 506% to $7.1 million or $0.37 per diluted share compared to a net loss of $1.8 million or $(0.07) per diluted share, in the same period last year.
About HeartCore Enterprises, Inc.
Headquartered in Tokyo, Japan, HeartCore Enterprises is a leading enterprise software and consulting services company. HeartCore offers Software as a Service (SaaS) solutions to enterprise customers in Japan and worldwide. The Company also provides data analytics services that allow enterprise businesses to create tailored web experiences for their clients through best-in-class design. HeartCore's customer experience management platform (CXM Platform) includes marketing, sales, service and content management systems, as well as other tools and integrations, which enable companies to enhance the customer experience and drive engagement. HeartCore also operates a digital transformation business that provides customers with robotics process automation, process mining and task mining to accelerate the digital transformation of enterprises. HeartCore's GO IPOSM consulting services helps Japanese-based companies go public in the U.S. Additional information about the Company's products and services is available at and https://heartcore-enterprises.com/.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, or the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as “believed,” “intend,” “expect,” “anticipate,” “plan,” “potential,” “continue,” or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks, and uncertainties are discussed in HeartCore's filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond HeartCore's control which could, and likely will materially affect actual results, and levels of activity, performance, or achievements. Any forward-looking statement reflects HeartCore's current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to operations, results of operations, growth strategy, and liquidity. HeartCore assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The contents of any website referenced in this press release are not incorporated by reference herein.
HeartCore Investor Relations Contact:
Gateway Group, Inc.
Matt Glover and John Yi
HTCR@gateway-grp.com
(949) 574-3860
| HeartCore Enterprises, Inc. | ||||||
| Consolidated Balance Sheets | ||||||
| September 30, | December 31, | |||||
| 2024 | 2023 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 1,232,117 | $ | 1,012,479 | ||
| Accounts receivable | 2,578,855 | 2,623,682 | ||||
| Investments in marketable securities | 7,349,575 | 642,348 | ||||
| Investment in equity securities | – | 300,000 | ||||
| Prepaid expenses | 769,183 | 536,865 | ||||
| Current portion of long-term note receivable | 100,000 | 100,000 | ||||
| Due from related party | 43,852 | 44,758 | ||||
| Other current assets | 177,381 | 234,761 | ||||
| Total current assets | 12,250,963 | 5,494,893 | ||||
| Non-current assets: | ||||||
| Accounts receivable, non-current | 766,972 | – | ||||
| Property and equipment, net | 663,447 | 763,730 | ||||
| Operating lease right-of-use assets | 2,184,344 | 2,467,889 | ||||
| Intangible asset, net | 4,037,500 | 4,515,625 | ||||
| Goodwill | 3,276,441 | 3,276,441 | ||||
| Long-term investment in SAFE | 350,000 | – | ||||
| Long-term investment in equity securities | 300,000 | – | ||||
| Long-term investment in warrants | 551,787 | 2,004,308 | ||||
| Long-term note receivable | 200,000 | 200,000 | ||||
| Deferred tax assets | 392,617 | 369,436 | ||||
| Security deposits | 336,117 | 348,428 | ||||
| Long-term loan receivable from related party | 146,354 | 182,946 | ||||
| Other non-current assets | 15,812 | 71 | ||||
| Total non-current assets | 13,221,391 | 14,128,874 | ||||
| Total assets | $ | 25,472,354 | $ | 19,623,767 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued expenses | $ | 1,779,799 | $ | 1,757,038 | ||
| Accounts payable and accrued expenses – related party | 28,772 | – | ||||
| Accrued payroll and other employee costs | 633,514 | 723,305 | ||||
| Due to related party | 1,438 | 1,476 | ||||
| Short-term debt | – | 135,937 | ||||
| Current portion of long-term debts | 462,121 | 371,783 | ||||
| Insurance premium financing | 65,392 | – | ||||
| Factoring liability | 305,472 | 562,767 | ||||
| Operating lease liabilities, current | 382,594 | 396,535 | ||||
| Finance lease liabilities, current | 17,375 | 17,445 | ||||
| Income tax payables | 170,453 | 162,689 | ||||
| Deferred revenue | 1,927,582 | 2,166,175 | ||||
| Other current liabilities | 756,766 | 216,405 | ||||
| Total current liabilities | 6,531,278 | 6,511,555 | ||||
| – | ||||||
| Non-current liabilities: | ||||||
| Long-term debts | 1,382,048 | 1,770,352 | ||||
| Operating lease liabilities, non-current | 1,859,948 | 2,135,160 | ||||
| Finance lease liabilities, non-current | 52,005 | 66,779 | ||||
| Deferred tax liabilities | 1,130,500 | 1,264,375 | ||||
| Other non-current liabilities | 200,818 | 208,732 | ||||
| Total non-current liabilities | 4,625,319 | 5,445,398 | ||||
| Total liabilities | 11,156,597 | 11,956,953 | ||||
| Shareholders' equity: | ||||||
| Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of September 30, 2024 and December 31, 2023) | – | – | ||||
| Common shares ($0.0001 par value, 200,000,000 shares authorized; 20,864,144 and 20,842,690 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively) | 2,085 | 2,083 | ||||
| Additional paid-in capital | 18,997,059 | 19,594,801 | ||||
| Accumulated deficit | (6,990,113 | ) | (14,763,469 | ) | ||
| Accumulated other comprehensive income | 392,397 | 331,881 | ||||
| Total HeartCore Enterprises, Inc. shareholders' equity | 12,401,428 | 5,165,296 | ||||
| Non-controlling interests | 1,914,329 | 2,501,518 | ||||
| Total shareholders' equity | 14,315,757 | 7,666,814 | ||||
| Total liabilities and shareholders' equity | $ | 25,472,354 | $ | 19,623,767 | ||
| HeartCore Enterprises, Inc. | |||||||||||||||
| Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||||||||||
| For the nine months ended September 30, | For the three months ended September 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||
| Revenues | $ | 26,963,531 | $ | 18,518,431 | $ | 17,850,411 | $ | 4,688,908 | |||||||
| Cost of revenues | 9,708,074 | 10,548,245 | 3,433,024 | 3,860,241 | |||||||||||
| Gross profit | 17,255,457 | 7,970,186 | 14,417,387 | 828,667 | |||||||||||
| Operating expenses: | |||||||||||||||
| Selling expenses | 642,225 | 1,330,747 | 243,110 | 274,043 | |||||||||||
| General and administrative expenses | 6,395,429 | 7,305,392 | 1,966,717 | 2,172,298 | |||||||||||
| Research and development expenses | 307,931 | 289,303 | 107,529 | 170,071 | |||||||||||
| Total operating expenses | 7,345,585 | 8,925,442 | 2,317,356 | 2,616,412 | |||||||||||
| Income (loss) from operations | 9,909,872 | (955,256 | ) | 12,100,031 | (1,787,745 | ) | |||||||||
| Other income (expenses): | |||||||||||||||
| Changes in fair value of investments in marketable securities | (308,059 | ) | (500,762 | ) | 122,272 | (271,740 | ) | ||||||||
| Changes in fair value of investment in warrants | 1,631,700 | (294,565 | ) | 2,869,407 | (460,672 | ) | |||||||||
| Loss on sale of warrants | (3,970,628 | ) | – | (3,970,628 | ) | – | |||||||||
| Interest income | 15,557 | 64,633 | 10,933 | 14,363 | |||||||||||
| Interest expenses | (105,094 | ) | (125,073 | ) | (31,393 | ) | (42,619 | ) | |||||||
| Other income | 158,914 | 176,641 | 24,040 | 52,640 | |||||||||||
| Other expenses | (131,507 | ) | (62,701 | ) | (82,457 | ) | (25,947 | ) | |||||||
| Total other expenses | (2,709,117 | ) | (741,827 | ) | (1,057,826 | ) | (733,975 | ) | |||||||
| Income (loss) before income tax provision | 7,200,755 | (1,697,083 | ) | 11,042,205 | (2,521,720 | ) | |||||||||
| Income tax expense | 72,945 | 58,859 | 225,275 | 19,413 | |||||||||||
| Net income (loss) | 7,127,810 | (1,755,942 | ) | 10,816,930 | (2,541,133 | ) | |||||||||
| Less: net loss attributable to non-controlling interests | (645,546 | ) | (419,211 | ) | (240,876 | ) | (233,913 | ) | |||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. | $ | 7,773,356 | $ | (1,336,731 | ) | $ | 11,057,806 | $ | (2,307,220 | ) | |||||
| Other comprehensive income (loss): | |||||||||||||||
| Foreign currency translation adjustment | 51,678 | (85,244 | ) | 65,503 | (90,743 | ) | |||||||||
| Total comprehensive income (loss) | 7,179,488 | (1,841,186 | ) | 10,882,433 | (2,631,876 | ) | |||||||||
| Less: comprehensive loss attributable to non-controlling interests | (654,384 | ) | (422,352 | ) | (241,913 | ) | (235,094 | ) | |||||||
| Comprehensive income (loss) attributable to HeartCore Enterprises, Inc. | $ | 7,833,872 | $ | (1,418,834 | ) | $ | 11,124,346 | $ | (2,396,782 | ) | |||||
| Net income (loss) per common share attributable to HeartCore Enterprises, Inc. | |||||||||||||||
| Basic | $ | 0.37 | $ | (0.07 | ) | $ | 0.53 | $ | (0.11 | ) | |||||
| Diluted | $ | 0.37 | $ | (0.07 | ) | $ | 0.53 | $ | (0.11 | ) | |||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 20,861,012 | 20,257,020 | 20,864,144 | 20,842,690 | |||||||||||
| Diluted | 20,861,012 | 20,257,020 | 20,864,144 | 20,842,690 | |||||||||||
| HeartCore Enterprises, Inc. | ||||||
| Unaudited Consolidated Statements of Cash Flows | ||||||
| For the nine months ended September 30, | ||||||
| 2024 | 2023 | |||||
| Cash flows from operating activities | ||||||
| Net income (loss) | $ | 7,127,810 | $ | (1,755,942 | ) | |
| Adjustments to reconcile net income (loss) to net cash flows | ||||||
| used in operating activities: | ||||||
| Depreciation and amortization expenses | 561,659 | 495,200 | ||||
| Loss (gain) on disposal of property and equipment | 1,894 | (4,737 | ) | |||
| Amortization of debt issuance costs | 3,791 | 2,257 | ||||
| Non-cash lease expense | 272,208 | 254,876 | ||||
| Loss (gain) on termination of lease | (469 | ) | 76 | |||
| Deferred income taxes | (163,199 | ) | (109,690 | ) | ||
| Stock-based compensation | 236,826 | 1,267,699 | ||||
| Marketable securities received as noncash consideration | (572,010 | ) | – | |||
| Warrants received as noncash consideration | (12,969,683 | ) | (4,009,335 | ) | ||
| Changes in fair value of investments in marketable securities | 308,059 | 500,762 | ||||
| Changes in fair value of investment in warrants | (1,631,700 | ) | 294,565 | |||
| Loss on sale of warrants | 3,970,628 | – | ||||
| Changes in assets and liabilities: | ||||||
| Accounts receivable | (685,531 | ) | (322,583 | ) | ||
| Prepaid expenses | (72,315 | ) | 187,269 | |||
| Other assets | 40,761 | (23,982 | ) | |||
| Accounts payable and accrued expenses | 34,752 | 597,247 | ||||
| Accounts payable and accrued expenses – related party | 28,315 | – | ||||
| Accrued payroll and other employee costs | (68,323 | ) | 7,471 | |||
| Due to related party | (7 | ) | 7,562 | |||
| Operating lease liabilities | (275,850 | ) | (231,499 | ) | ||
| Income tax payables | 17,971 | 101,058 | ||||
| Deferred revenue | (205,109 | ) | 200,256 | |||
| Other liabilities | 540,008 | 83,809 | ||||
| Net cash flows used in operating activities | (3,499,514 | ) | (2,457,661 | ) | ||
| Cash flows from investing activities | ||||||
| Purchases of property and equipment | (4,134 | ) | (516,658 | ) | ||
| Proceeds from disposal of property and equipment | – | 24,935 | ||||
| Advance on note receivable | – | (600,000 | ) | |||
| Purchase of long-term investment in SAFE | (350,000 | ) | – | |||
| Net proceeds from sale of warrants | 5,640,000 | – | ||||
| Repayment of loan provided to related party | 31,457 | 34,823 | ||||
| Payment for acquisition of subsidiary, net of cash acquired | – | (724,910 | ) | |||
| Net cash flows provided by (used in) investing activities | 5,317,323 | (1,781,810 | ) | |||
| Cash flows from financing activities | ||||||
| Payments for finance leases | (12,568 | ) | (16,537 | ) | ||
| Proceeds from short-term and long-term debts | 68,138 | 219,427 | ||||
| Repayment of short-term and long-term debts | (453,048 | ) | (584,779 | ) | ||
| Repayment of insurance premium financing | (107,297 | ) | (266,756 | ) | ||
| Net proceeds from factoring arrangement | – | 217,250 | ||||
| Net repayment of factoring arrangement | (257,295 | ) | – | |||
| Payments for debt issuance costs | – | (656 | ) | |||
| Distribution of dividends | (834,566 | ) | – | |||
| Capital contribution from non-controlling shareholder | 67,195 | – | ||||
| Net cash flows used in financing activities | (1,529,441 | ) | (432,051 | ) | ||
| Effect of exchange rate changes | (68,730 | ) | (306,239 | ) | ||
| Net change in cash and cash equivalents | 219,638 | (4,977,761 | ) | |||
| Cash and cash equivalents – beginning of the period | 1,012,479 | 7,177,326 | ||||
| Cash and cash equivalents – end of the period | $ | 1,232,117 | $ | 2,199,565 | ||
| Supplemental cash flow disclosures: | ||||||
| Interest paid | $ | 104,880 | $ | 59,290 | ||
| Income taxes paid | $ | 201,035 | $ | 91,657 | ||
| Non-cash investing and financing transactions | ||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $ | 125,735 | $ | 317,040 | ||
| Finance lease right-of-use assets obtained in exchange for finance lease liabilities | $ | – | $ | 93,117 | ||
| Remeasurement of operating lease liabilities and right-of-use assets due to lease modification | $ | – | $ | 12,579 | ||
| Insurance premium financing | $ | 172,689 | $ | 389,035 | ||
| Liabilities assumed in connection with purchase of property and equipment | $ | – | $ | 9,602 | ||
| Common shares issued for acquisition of subsidiary | $ | – | $ | 3,150,000 | ||
| Warrants converted to marketable securities | $ | 6,443,276 | $ | 1,257,868 | ||
