HeartCore Enterprises, Inc. SEC 10-K Report

HeartCore Enterprises, Inc., a leading software development company based in Tokyo, Japan, has released its annual Form 10-K report, detailing significant financial and operational achievements for the fiscal year. The company operates through two main business units: the Customer Experience Management (CXM) division and the Digital Transformation (DX) division, focusing on customer experience management systems and digital transformation solutions, respectively.

Financial Highlights

• Total Revenues: $30.4 million, increased by 39.2% from the previous year, mainly due to increased revenue from GO IPO consulting services and on-premise software sales.
• Gross Profit: $17.8 million, increased by 121.0% from the previous year, driven by higher revenues from GO IPO consulting services with no associated costs.
• Income (loss) from operations: $0.06 million, a significant improvement from a loss of $4.1 million in the previous year, reflecting better cost management and increased revenue.
• Net Loss: $5.2 million, increased by 6.9% from the previous year, primarily due to impairments of intangible assets and goodwill.
• Net Loss Attributable to HeartCore Enterprises, Inc.: $1.5 million, decreased by 64.6% from the previous year, indicating improved financial performance despite the overall net loss.

Business Highlights

• Business Overview: HeartCore Enterprises, Inc. operates through two main business units: the Customer Experience Management (CXM) division and the Digital Transformation (DX) division. The CXM division focuses on customer experience management systems, while the DX division provides digital transformation solutions such as robotic process automation and process mining.
• Customer Base: As of December 31, 2024, HeartCore had 982 total customers in Japan, with 73.7% being paying customers. Outside Japan, the company had 26 customers, with only one being a paying customer. The company also has 280 non-paying customers who previously used paid services.
• Geographical Performance: The company has a strong presence in Japan, with a diversified revenue and customer base. Efforts to expand internationally are ongoing, with a focus on increasing market presence in North America, where customers represented 25.83% of total revenues as of December 31, 2024.
• New Business Initiatives: In 2022, HeartCore launched the GO IPO business to support Japanese companies in listing on Nasdaq and NYSE. By the end of 2024, the company had consulting agreements with 14 companies for IPO assistance.
• Acquisitions and Expansions: In February 2023, HeartCore acquired 51% of Sigmaways, a U.S.-based software development company. Additionally, in the fourth quarter of 2023, HeartCore formed a 51% owned subsidiary in Vietnam, HeartCore Luvina, which began operations in February 2024.
• Product Offerings: The CXM Platform includes marketing, sales, service, and content management systems, while the DX division offers solutions for digital transformation, including RPA and process mining technologies.
• Sales and Marketing Strategy: HeartCore employs a go-to-market strategy with a sales and marketing organization of 12 employees, focusing on enterprise sales, high-velocity inside sales, and global strategic sales. The company also leverages channel partnerships to extend its reach.
• Future Outlook: HeartCore plans to continue expanding its customer base, increase revenue from existing customers, and grow its international presence. The company aims to innovate and expand its CXM Platform and pursue strategic acquisitions to enhance its offerings.

Strategic Initiatives

• Strategic Initiatives: HeartCore Enterprises, Inc. has been actively expanding its business operations through strategic acquisitions and the formation of new subsidiaries. In 2023, the company acquired a 51% stake in Sigmaways, a U.S.-based software development company, and established HeartCore Financial and HeartCore Capital Advisors in the U.S. as part of its Go IPO consulting business. Additionally, HeartCore Luvina was formed in Vietnam to enhance software development capabilities. The company has also focused on international market expansion, particularly in Japan, where it maintains a strong sales presence.
• Capital Management: The company has engaged in several capital management activities, including the issuance of dividends and share repurchases. In 2024, HeartCore declared and paid two cash dividends of $0.02 per share, totaling $834,566. The company also completed a share repurchase program in 2022, buying back 1,349,390 shares at an average price of $2.59 per share, totaling approximately $3.5 million. Furthermore, HeartCore raised $1,423,342 through the issuance of common stocks in 2024 to support its capital needs.
• Future Outlook: HeartCore plans to continue its strategic focus on expanding its international presence and enhancing its software offerings. The company aims to leverage its Go IPO consulting services to support more Japanese companies in listing on U.S. stock exchanges, which could provide significant revenue opportunities. Additionally, HeartCore intends to maintain its dividend policy, subject to financial performance and board approval, and may explore further share repurchase programs to enhance shareholder value.

Challenges and Risks

• Competitive Pressures: The company faces significant competitive pressures in its industry, which could reduce its market share and adversely affect its financial position and cash flows.
• Dependency on Subsidiary: As a holding company, HeartCore relies on its subsidiary for cash flows, which could be impacted by the subsidiary's earnings and legal restrictions.
• Funding Requirements: The company may require additional funding for growth, potentially diluting current investments.
• Corporate Governance Risks: The company faces risks related to corporate governance as it transitions from a controlled company status, which may affect compliance with Nasdaq rules.
• Potential Delisting: The company's common stock faces potential delisting under the Holding Foreign Companies Accountable Act if the PCAOB cannot inspect its auditor, which could materially affect investment value.
• Customer Renewals: The company is heavily dependent on customer renewals and the growth of markets for its software solutions, with risks of decreased subscription renewal rates impacting future revenue.
• Operational Risks: Managing rapid growth and organizational change could impact service levels and competitive positioning. The company relies on third-party partners for service delivery, and any disruption could affect its operations.
• Technology and Customer Needs: The company faces risks related to maintaining its brand and adapting to rapidly changing technology and customer needs.
• Software Outages and Security Breaches: The company is exposed to risks from potential software outages, security breaches, and reliance on third-party data hosting services.
• Privacy and Regulatory Compliance: Privacy concerns and regulatory compliance, particularly related to data protection, could limit software adoption and expose the company to liabilities.
• Currency Exchange Rates: The company is exposed to fluctuations in currency exchange rates, particularly with the British Pound Sterling and Japanese Yen, which could materially affect its financial results.
• Global Economic Conditions: The company faces risks from global economic conditions, which could impact customer spending and demand for its software solutions.

SEC Filing: HeartCore Enterprises, Inc. [ HTCR ] - 10-K - Mar. 31, 2025