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HeartCore Reports Second Quarter 2023 Financial Results

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HeartCore Enterprises, Inc. (Nasdaq: HTCR) reported financial results for Q2 2023, highlighting a 91% revenue growth and a YTD revenue growth of 180%. The company's CEO expressed optimism for a robust second half of the year, despite a Q2 EPS loss of $0.04 due to lower consulting services revenue.
Positive
  • 91% revenue growth in Q2 2023 compared to the same period in 2022.
  • YTD revenue growth of 180% compared to the same period in 2022.
  • CEO expressed optimism for a robust second half of the year.
  • Net income increased to $7.1 million with a gross margin of 52% in the first six months of 2023.
Negative
  • None.

NEW YORK and TOKYO, Aug. 14, 2023 (GLOBE NEWSWIRE) -- HeartCore Enterprises, Inc. (Nasdaq: HTCR) (“HeartCore” or “the Company”), a leading software development company offering Customer Experience Management Platform (“CXM Platform”) and Digital Transformation (“DX”), reported financial results for the second quarter ended June 30, 2023.

Second Quarter 2023 and Recent Operational Highlights

  • Partnered with INTRIX, Inc. to license HeartCore’s Content Management System (CMS).
  • Executed a deal with Honda Trading Corporation for HeartCore’s task mining software solution, CONTROLIO, a web-based cloud system for employee monitoring and productivity enhancement.
  • Presented virtually and held one-on-one meetings at the Sidoti & Co.’s June Virtual Small-Cap Conference.
  • Hosted a U.S. Exchange Listing seminar in Tokyo, Japan on June 9, 2023 to a myriad of Japanese companies on the realities of going public on U.S. Exchanges in addition to an overview of its very successful Go IPO consulting service.
  • Partnered with Toppan Inc. to strengthen and expand Toppan’s digital marketing business utilizing HeartCore’s Contents Management System, in addition to both companies collaborating on joint business ventures.
  • Signed tenth Go IPO consulting service agreement with rYojbaba Inc.
  • Second quarter revenue grew 91% compared to same period 2022.
  • Year-to-Date revenue grew 180% compared to same period 2022.
  • Q2 2023 EPS loss of $0.04 was primarily due to lower consulting services revenue as none of HeartCore’s clients’ pending IPOs were completed in the second quarter.
  • YTD 2023 Company remained profitable and expects significant growth in second half 2022.

Management Commentary
“This past quarter reflected a period of growth from our enterprise software division, in addition to a time of important back-end movement within our Go IPO segment as our two-pronged growth strategy continues to manifest into full effect,” said CEO Sumitaka Yamamoto. “As evidenced by growth of 102% and successfully hitting profitability within our enterprise software vertical, we continue to garner new customers and capitalize on synergistic opportunities with Sigmaways. Though we didn’t have any Go IPO clients go public in Q2, we have a significant amount of progress being made behind the scenes and expect to see a robust second half of the year and beyond. I am very encouraged by the results we’ve generated year to date and expect an even stronger end to the calendar year.”

Second Quarter 2023 Financial Results
Revenues increased 91% to $5.1 million compared to $2.7 million in the same period last year. The increase was primarily due to increased revenue from customized software development and services as a result of Sigmaway and its subsidiaries, and an increase from GO IPO consulting services as the Company obtained more IPO Consulting customers in 2023.

Gross profit increased 13% to $1.5 million (gross margin of 30%) from $1.3 million (gross margin of 50%) in the same period last year. The increase was primarily from increased maintenance and support services and customized software development and services, offset by decrease in sales of on-premise software.

Operating expenses remained consistent at $3.0 million from the same period last year. The increase in general and administrative expenses was offset by decreases in selling and research and development expenses.

Net loss was $1.0 million or $(0.04) per diluted share, compared to a net loss of $1.7 million or $(0.09) per diluted share, in the same period last year.

As of June 30, 2023, the Company had cash and cash equivalents of $4.2 million compared to $7.2 million in December 31, 2022.

Six Months 2023 Financial Results
Revenues increased 180% to $13.8 million compared to $4.9 million in the same period last year. The increase was primarily due to increased revenue from customized software development and services as a result of Sigmaways and its subsidiaries, and an increase from GO IPO consulting services as the Company obtained more IPO Consulting customers in 2023 and received warrants from its customers.

Gross profit increased 180% to $7.1 million (gross margin of 52%) from $2.6 million (gross margin of 52%) in the same period last year. The increase was primarily due to an increase from GO IPO consulting services and customized software development and services.

Operating expenses increased to $6.3 million from $5.8 million in the same period last year. The increase was primarily due to increases in selling and general and administrative expenses, offset by a decrease in research and development expenses.

Net income was about $785,000 or $0.05 per diluted share compared to a net loss of $3.3 million or $(0.18) per diluted share, in the same period last year.

About HeartCore Enterprises, Inc.
Headquartered in Tokyo, Japan, HeartCore Enterprises is a leading software development company offering 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. Furthermore, HeartCore offers “Go IPO,” a consulting service where it assists private companies with uplisting onto the Nasdaq Stock Market. Additional information about the Company's products and services is available at and https://heartcore-enterprises.com/.

Forward-Looking Statements
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 “believe,” “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.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
            
  For the six months ended
June 30,
  For the three months ended
June 30,
  2023  2022  2023  2022
            
Revenues$13,829,523  $4,946,298  $5,095,373  $2,670,297 
Cost of revenues 6,688,004   2,392,652   3,586,938   1,337,296 
Gross profit 7,141,519   2,553,646   1,508,435   1,333,001 
            
Operating expenses:           
Selling expenses 1,056,704   934,754   488,062   728,836 
General and administrative expenses 5,133,094   4,319,248   2,447,887   1,850,315 
Research and development expenses 119,232   525,487   39,608   417,228 
Total operating expenses 6,309,030   5,779,489   2,975,557   2,996,379 
            
Income (loss) from operations 832,489   (3,225,843)  (1,467,122)  (1,663,378)
            
Other income (expenses):           
Changes in fair value of investments in marketable securities (229,022)  -   (229,022)  - 
Changes in fair value of investments in warrants 166,107   -   (27,258)  - 
Interest income 50,270   10,549   18,665   9,091 
Interest expenses (82,454)  (28,861)  (42,614)  (17,590)
Other income 124,001   25,450   109,800   8,777 
Other expenses (36,754)  (55,224)  (7,297)  (31,562)
Total other expenses (7,852)  (48,086)  (177,726)  (31,284)
            
Income (loss) before income tax provision 824,637   (3,273,929)  (1,644,848)  (1,694,662)
            
Income tax expense (benefit) 39,446   8,163   (622,002)  8,979 
            
Net income (loss) 785,191   (3,282,092)  (1,022,846)  (1,703,641)
Less: net loss attributable to non-controlling interest (185,298)  -   (111,046)  - 
Net income (loss) attributable to HeartCore Enterprises, Inc.$970,489  $(3,282,092) $(911,800) $(1,703,641)
            
Other comprehensive income:           
Foreign currency translation adjustment 5,499   299,413   30,533   219,360 
            
Total comprehensive income (loss) 790,690   (2,982,679)  (992,313)  (1,484,281)
Less: comprehensive loss attributable to non-controlling interest (187,258)  -   (110,716)  - 
Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.$977,948  $(2,982,679) $(881,597) $(1,484,281)
            
Net income (loss) per common share attributable to HeartCore Enterprises, Inc.            
Basic$0.05  $(0.18) $(0.04) $(0.09)
Diluted$0.05  $(0.18) $(0.04) $(0.09)
            
Weighted average common shares outstanding           
Basic 19,959,333   18,105,698   20,842,690   18,936,829 
Diluted 19,959,333   18,105,698   20,842,690   18,936,829 


 

HeartCore Enterprises, Inc.
Condensed Consolidated Balance Sheets
     
  June 30, December 31,
  2023 2022
  (Unaudited)  
ASSETS      
     
Current assets:    
Cash and cash equivalents$4,238,741 $7,177,326 
Accounts receivable 2,812,337  551,064 
Investments in marketable securities 1,028,846  - 
Prepaid expenses 878,539  538,230 
Note receivable 300,000  - 
Due from related party 43,782  48,447 
Other current assets 79,339  220,070 
Total current assets 9,381,584  8,535,137 
     
Non-current assets:    
Property and equipment, net 331,389  203,627 
Operating lease right-of-use assets 2,275,506  2,644,957 
Intangible asset, net 4,834,375  - 
Goodwill 3,276,441  - 
Long-term investment in warrants 2,917,574  - 
Deferred tax assets 238,783  263,339 
Security deposits 339,052  244,395 
Long-term loan receivable from related party 200,849  246,472 
Other non-current assets 69  661 
Total non-current assets 14,414,038  3,603,451 
     
Total assets$23,795,622 $12,138,588 
     
LIABILITIES AND SHAREHOLDERS' EQUITY      
     
Current liabilities:    
Accounts payable and accrued expenses$1,194,222 $497,742 
Accrued payroll and other employee costs 561,698  360,222 
Due to related party 4,250  402 
Current portion of long-term debts 548,297  697,877 
Insurance premium financing 239,785  - 
Factoring liability 328,967  - 
Operating lease liabilities, current 262,063  291,863 
Finance lease liabilities, current 7,386  19,294 
Income tax payables 109,625  2,747 
Deferred revenue 2,375,063  1,724,519 
Other current liabilities 262,267  53,027 
Total current liabilities 5,893,623  3,647,693 
     
Non-current liabilities:    
Long term debts 1,324,383  1,123,735 
Operating lease liabilities, non-current 2,066,343  2,421,054 
Finance lease liabilities, non-current -  459 
Deferred tax liabilities 1,353,625  - 
Other non-current liabilities 124,936  138,018 
Total non-current liabilities 4,869,287  3,683,266 
     
Total liabilities 10,762,910  7,330,959 
     
Shareholders' equity:    
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively) -  - 
Common shares ($0.0001 par value, 200,000,000 shares authorized; 20,842,690 and 17,649,886 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively) 2,083  1,764 
Additional paid-in capital 19,258,681  15,014,607 
Accumulated deficit (9,603,090) (10,573,579)
Accumulated other comprehensive income 372,296  364,837 
Total HeartCore Enterprises, Inc. shareholders' equity 10,029,970  4,807,629 
Non-controlling interest 3,002,742  - 
Total shareholders' equity 13,032,712  4,807,629 
     
Total liabilities and shareholders' equity$23,795,622 $12,138,588 


HeartCore Enterprises, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
     
  For the six months ended June 30,
  2023 2022
     
Cash flows from operating activities    
Net income (loss)$785,191 $(3,282,092)
Adjustments to reconcile net income (loss) to net cash     
used in operating activities:    
Depreciation and amortization expenses 306,097  46,688 
Amortization of debt issuance costs 1,316  2,768 
Non-cash lease expense 155,301  143,845 
Deferred income taxes (75,240) 14,167 
Stock-based compensation 1,094,393  888,826 
Warrants received as noncash consideration (4,009,335) - 
Changes in fair value of investments in marketable securities 229,022  - 
Changes in fair value of investments in warrants (166,107) - 
Changes in assets and liabilities:    
Accounts receivable (596,312) (344,779)
Prepaid expenses 1,245  (266,030)
Other assets 23,277  (5,516)
Accounts payable and accrued expenses (8,359) 281,567 
Accrued payroll and other employee costs 124  175,246 
Due to related party 4,214  5,448 
Operating lease liabilities (147,035) (148,125)
Finance lease liabilities -  (288)
Income tax payables 106,625  (8,756)
Deferred revenue 810,639  596,762 
Other liabilities 116,382  (193,598)
Net cash flows used in operating activities (1,368,562) (2,093,867)
     
Cash flows from investing activities    
Purchases of property and equipment (180,451) (30,963)
Advance on note receivable (300,000) - 
Repayment of loan provided to related party 23,715  21,508 
Payment for acquisition of subsidiary, net of cash acquired (724,910) - 
Net cash flows used in investing activities (1,181,646) (9,455)
     
Cash flows from financing activities    
Proceeds from initial public offering, net of issuance cost -  13,602,554 
Proceeds from issuance of common shares prior to initial public offering -  220,572 
Repurchase of common shares -  (1,336,762)
Payments for finance leases (11,243) (24,189)
Proceeds from long-term debt -  258,087 
Repayment of long-term debts (411,923) (469,166)
Repayment of insurance premium financing (149,250) (167,955)
Net proceeds from factoring arrangement 328,967  - 
Payments for debt issuance costs (448) (1,030)
Payment for mandatorily redeemable financial interest -  (430,489)
Net cash flows provided by (used in) financing activities (243,897) 11,651,622 
     
Effect of exchange rate changes (144,480) (221,960)
     
Net change in cash and cash equivalents (2,938,585) 9,326,340 
     
Cash and cash equivalents - beginning of the period 7,177,326  3,136,839 
     
Cash and cash equivalents - end of the period$4,238,741 $12,463,179 
      
Supplemental cash flow disclosures:    
Interest paid$40,083 $28,025 
Income taxes paid$- $3,013 
     
Non-cash investing and financing transactions    
Payroll withheld as repayment of loan receivable from employees$- $12,034 
Share repurchase liability settled by issuance of common shares$- $16 
Deferred offering costs recognized against the proceeds from the offering$- $178,847 
Insurance premium financing$389,035 $388,538 
Liabilities assumed in connection with purchase of property and equipment$2,199 $9,676 
Common shares issued for acquisition of subsidiary$3,150,000 $- 
Investments in warrants converted to marketable securities$1,257,868 $- 

 


FAQ

What is HeartCore Enterprises, Inc. (Nasdaq: HTCR) Q2 2023 revenue growth?

HeartCore Enterprises, Inc. reported a 91% revenue growth in Q2 2023 compared to the same period in 2022.

What is HeartCore Enterprises, Inc. (Nasdaq: HTCR) YTD revenue growth?

HeartCore Enterprises, Inc. reported a YTD revenue growth of 180% compared to the same period in 2022.

What is HeartCore Enterprises, Inc. (Nasdaq: HTCR) CEO's outlook for the second half of the year?

The CEO expressed optimism for a robust second half of the year.

What is HeartCore Enterprises, Inc. (Nasdaq: HTCR) net income in the first six months of 2023?

Net income was $7.1 million with a gross margin of 52% in the first six months of 2023.

Heartcore Enterprises, Inc.

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