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
