HeartCore Reports 2024 Financial Results

NEW YORK and TOKYO, March 31, 2025 (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 year ended December 31, 2024. Recent Operational & Financial Highlights 2024 revenue increased 39% to $30.4 million year-over-yearHeartCore recorded $7.2 million in impairment of goodwill and intangible asset related to acquisition of its subsidiary Sigmaways. The losses are considered as a one-time occurrence that will not affect the Company’s business and financial performance in the future quarters.Established new business development team aimed at strengthening customer success across HeartCore’s CMS businessAnnounced plans to expand the Go IPO consulting business into South Korea. The Company adjusted its scheduled South Korea IPO seminar event to September 2025Announced new digital customer experience initiatives and cross-selling effortsRegained compliance with Nasdaq’s continued listing requirementsExpanded CMS platform offering into a SaaS delivery modelEntered into a sales collaboration with Tosho Computer Systems Co., Ltd.Announced transition from annual contracts to multi-year agreements for core software business contractsPartnered with NTT Data Business Brains Corporation to enhance website development service capabilitiesAchieved top market share in Japan for nine consecutive yearsAwarded new contract from Fourmix Co., Ltd. to implement CMS platform Management CommentaryHeartCore CEO Sumitaka Kanno commented: “Over the past year, we made several strategic advancements in our software business model, all aimed at driving sustainable and predictable revenue growth, improving margins, and enhancing our ability to effectively cross-sell and upsell to our 1,000+ enterprise customers. While we are confident that the initiatives we have implemented will yield meaningful returns, we have also recognized that strategic acquisitions will be critical to maintaining our market leadership in Japan and sustaining our strong customer retention rate. With a well-established customer base built over the years, our acquisition strategy will primarily focus on deepening wallet share with each client we are engaged with, while seamlessly complementing and enhancing our existing suite of software solutions. This will include acquiring companies with synergistic technologies that align with our core offerings and leveraging effective use of AI to strengthen our value proposition and competitive edge. Outside of acquisitions, another key focus for HeartCore will be to accelerate the development of new products geared for global expansion in 2025, with the target launch aimed for the first half of 2026. Currently, only a small portion of our customer base consists of enterprises outside of Japan. By focusing on creating globally scalable solutions and enhancing our offerings with synergistic technologies through strategic acquisitions, we aim to expand our presence across international markets and drive additional growth in our software business. “Looking at our financial performance, we recorded approximately $7.2 million in impairment of goodwill and intangible asset, primarily related to our subsidiary, Sigmaways. While these losses impacted our full-year results, they are classified as one-time occurrences and are not expected to affect our financial performance in future quarters. To address this, we have already implemented several corrective measures, including separating Sigmaways’ liabilities and suspending all transactions with small venture companies to minimize any non-essential costs. While net loss for the year was $5.2 million, we believe a more relevant measure of our performance is adjusted EBITDA, which totaled $7.3 million for 2024, as it excludes the losses related to Sigmaways. Nevertheless, our subsidiaries continue to deliver synergistic technologies that enable us to effectively upsell and cross-sell to our shared clients. We believe that over the long term, as we continue to develop and innovate our solutions, acquire new technologies through M&A, and tap into mutual client portfolios across our partners and subsidiaries, we will drive positive outcomes for our financial performance. “Outside of exploring synergistic M&A opportunities within our software business to fuel growth, we are also focused on expanding our Go IPO business. We recently announced our plans to extend our service into South Korea and have formed a strategic partnership with a venture fund in the region. To kick off this initiative, we will be hosting a seminar in September of this year. South Korea will be the first of several markets we aim to expand into across the APAC region, as IPO interests from foreign issuers have steadily increased over the years. Expanding beyond Japan’s borders marks a significant milestone for our Go IPO business, opening up new opportunities for us to leverage. To ensure successful market entry, we are actively seeking strategic partnerships, such as in South Korea, to gain access to their clientele portfolio that are interested in our services. We remain dedicated to executing both lines of business and look forward to our growth prospects throughout 2025.” 2024 Financial ResultsRevenues increased 39% to $30.4 million, compared to $21.8 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 121% to $17.8 million, compared to $8.1 million in the same period last year. The increase was primarily due to the aforementioned reason. Operating expenses increased 46% to $17.8 million, compared to $12.2 million in the same period last year. The increase was primarily due to impairment of goodwill and intangible asset totaling approximately $7.2 million primarily related to our subsidiary, Sigmaways. The Company anticipates these impairment losses to be a one-time occurrence and does not foresee any material impact on its financial performance in future quarters. Net loss for 2024 was $5.2 million. Net loss attributable to HeartCore improved to $1.5 million, compared to a loss of $4.2 million in the same period last year. Adjusted EBITDA for the year totaled $7.3 million compared to $(3.6) million in the same period last year. As of December 31, 2024, the Company had cash and cash equivalents of $2.1 million, compared to $1.0 million on December 31, 2023. 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/. Non-GAAP Financial Measures DisclaimerThis document includes references to adjusted EBITDA, which is a non-GAAP financial measure. For the purposes of this presentation, adjusted EBITDA is calculated by adjusting net loss to exclude depreciation and amortization, impairment of intangible asset, and impairment of goodwill. This measure is presented as supplemental information and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. Management believes that this adjusted EBITDA provides useful information to investors by highlighting the company’s core operational performance, excluding non-cash and non-recurring items. However, non-GAAP financial measures have limitations and should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. ItemFY24FY23Net Loss-$5.2 million-$4.9 million(+) Depreciation$0.1 million$0.1 million(+) Impairment loss on goodwill$3.3 million$0.0 million(+) Impairment loss on intangible assets$3.9 million$0.0 million(+) Changes in fair value of investments in marketable securities$2.4 million$0.6 million(+) Changes in fair value of investment in warrants-$1.7 million$0.5 million(+) Loss on sale of warrants$4.0 million$0.0 million(+) Impairment of investment in equity securities$0.3 million$0.0 million(+) Loss on forgiveness of note receivable$0.1 million$0.0 million(+) Interest income$0.0 million-$0.1 million(+) Interest expenses$0.1 million$0.2 million(+) Government grants$0.0 million-$0.1 millionAdjusted EBITDA$7.3 million-$3.6 million Forward-Looking StatementsThis 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 YiHTCR@gateway-grp.com(949) 574-3860 HeartCore Enterprises, Inc. Consolidated Balance Sheets December 31, December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents$2,121,089 $1,012,479 Accounts receivable 1,950,050 2,623,682 Investments in marketable securities 4,495,703 642,348 Investment in equity securities - 300,000 Prepaid expenses 458,839 536,865 Current portion of long-term note receivable 100,000 100,000 Due from related party 40,139 44,758 Other current assets 251,545 234,761 Total current assets 9,417,365 5,494,893 Non-current assets: Accounts receivable, non-current 752,930 - Property and equipment, net 584,854 763,730 Operating lease right-of-use assets 1,936,097 2,467,889 Intangible asset, net - 4,515,625 Goodwill - 3,276,441 Long-term investment in warrants 577,786 2,004,308 Long-term note receivable 100,000 200,000 Deferred tax assets 152,300 369,436 Security deposits 307,996 348,428 Long-term loan receivable from related party 123,928 182,946 Other non-current assets 11,778 71 Total non-current assets 4,547,669 14,128,874 Total assets$13,965,034 $19,623,767 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses$2,039,323 $1,757,038 Accounts payable and accrued expenses - related party 47,199 - Accrued payroll and other employee costs 675,502 723,305 Due to related parties 932 1,476 Short-term debt - 135,937 Short-term debt - related party 75,000 - Current portion of long-term debts 401,255 371,783 Insurance premium financing 16,626 - Factoring liability 172,394 562,767 Operating lease liabilities, current 371,951 396,535 Finance lease liabilities, current 15,956 17,445 Income tax payables 822,014 162,689 Deferred revenue 1,876,490 2,166,175 Other current liabilities 907,080 216,405 Total current liabilities 7,421,722 6,511,555 Non-current liabilities: Long-term debts 1,238,813 1,770,352 Operating lease liabilities, non-current 1,614,996 2,135,160 Finance lease liabilities, non-current 43,593 66,779 Deferred tax liabilities - 1,264,375 Other non-current liabilities 183,895 208,732 Total non-current liabilities 3,081,297 5,445,398 Total liabilities 10,503,019 11,956,953 Shareholders' equity: Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of December 31, 2024 and 2023) - - Common shares ($0.0001 par value, 200,000,000 shares authorized; 21,937,987 and 20,842,690 shares issued and outstanding as of December 31, 2024 and 2023, respectively) 2,193 2,083 Subscription receivable (103,942) - Additional paid-in capital 20,656,153 19,594,801 Accumulated deficit (16,244,843) (14,763,469) Accumulated other comprehensive income 343,936 331,881 Total HeartCore Enterprises, Inc. shareholders' equity 4,653,497 5,165,296 Non-controlling interests (1,191,482) 2,501,518 Total shareholders' equity 3,462,015 7,666,814 Total liabilities and shareholders' equity$13,965,034 $19,623,767 HeartCore Enterprises, Inc. Consolidated Statements of Operations and Comprehensive Loss For the year ended December 31,2024 For the year ended December 31, 2023 Revenues$30,407,229 $21,845,830 Cost of revenues 12,579,359 13,778,416 Gross profit 17,827,870 8,067,414 Operating expenses: Selling expenses 1,255,368 1,516,247 General and administrative expenses 8,623,587 9,651,381 Research and development expenses 729,584 1,019,141 Impairment of intangible asset 3,878,125 - Impairment of goodwill 3,276,441 - Total operating expenses 17,763,105 12,186,769 Income (loss) from operations 64,765 (4,119,355) Other income (expenses): Changes in fair value of investments in marketable securities (2,412,385) (615,520) Changes in fair value of investment in warrants 1,657,699 (501,445) Loss on sale of warrants (3,970,628) - Impairment of investment in equity securities (300,000) - Loss on forgiveness of note receivable (100,000) - Interest income 18,835 70,624 Interest expenses (144,033) (162,968) Government grants - 76,612 Other income 260,918 366,283 Other expenses (424,893) (124,595) Total other expenses (5,414,487) (891,009) Loss before income tax benefit (5,349,722) (5,010,364) Income tax benefit (136,822) (133,664) Net loss (5,212,900) (4,876,700) Less: net loss attributable to non-controlling interests (3,731,526) (686,810) Net loss attributable to HeartCore Enterprises, Inc.$(1,481,374)$(4,189,890) Other comprehensive loss: Foreign currency translation adjustment (16,614) (34,628) Total comprehensive loss (5,229,514) (4,911,328) Less: comprehensive loss attributable to non-controlling interests (3,760,195) (688,482) Comprehensive loss attributable to HeartCore Enterprises, Inc.$(1,469,319)$(4,222,846) Net loss per common share attributable to HeartCore Enterprises, Inc. Basic$(0.07)$(0.21) Diluted$(0.07)$(0.21) Weighted average common shares outstanding Basic 20,940,956 20,404,642 Diluted 20,940,956 20,404,642 HeartCore Enterprises, Inc. Consolidated Statements of Cash Flows For the year ended December 31, 2024 For the year ended December 31, 2023 Cash flows from operating activities: Net loss$(5,212,900)$(4,876,700) Adjustments to reconcile net loss to net cash flows used in operating activities: Depreciation and amortization expenses 749,639 683,019 Loss (gain) on disposal of property and equipment 1,894 (4,514) Amortization of debt issuance costs 4,567 3,733 Non-cash lease expense 365,531 346,070 Loss (gain) on termination of lease (469) 76 Impairment of intangible asset 3,878,125 - Impairment of goodwill 3,276,441 - Deferred income taxes (1,076,600) (291,596) Stock-based compensation 368,744 1,430,513 Marketable securities received as noncash consideration (572,010) - Warrants received as noncash consideration (12,969,683) (3,763,621) Changes in fair value of investments in marketable securities 2,412,385 615,520 Changes in fair value of investment in warrants (1,657,699) 501,445 Loss on sale of warrants 3,970,628 - Impairment of investment in equity securities 300,000 - Impairment of investment in SAFE 75,000 - Loss on forgiveness of note receivable 100,000 - Changes in assets and liabilities: Accounts receivable (193,369) (338,312) Prepaid expenses 210,477 359,310 Other assets (38,336) (133,550) Accounts payable and accrued expenses 331,685 532,790 Accounts payable and accrued expenses - related party 47,955 - Accrued payroll and other employee costs 3,623 152,101 Due to related parties (1,338) 1,123 Operating lease liabilities (371,877) (327,877) Income tax payables 669,142 162,045 Deferred revenue (156,527) 553,130 Other liabilities 710,001 64,086 Net cash flows used in operating activities (4,774,971) (4,331,209) Cash flows from investing activities: Purchases of property and equipment (7,446) (526,260) Proceeds from disposal of property and equipment - 24,814 Advance on note receivable - (600,000) Purchase of investment in SAFE (75,000) - Net proceeds from sale of warrants 5,640,000 - Proceeds from sale of marketable securities 749,546 - Repayment of loan provided to related party 42,104 45,404 Payment for acquisition of subsidiary, net of cash acquired - (724,910) Net cash flows provided by (used in) investing activities 6,349,204 (1,780,952) Cash flows from financing activities: Payments for finance leases (16,766) (22,422) Proceeds from short-term and long-term debts 68,138 710,107 Proceeds from related party debt 75,000 - Repayment of short-term and long-term debts (554,553) (711,395) Repayment of insurance premium financing (156,063) (389,035) Net proceeds from factoring arrangement - 562,767 Net repayment of factoring arrangement (390,373) - Payments for debt issuance costs - (13,828) Distribution of dividends (834,566) - Capital contribution from non-controlling shareholder 67,195 - Proceeds from issuance of common shares 1,423,342 - Net cash flows provide by (used in) financing activities (318,646) 136,194 Effect of exchange rate changes (146,977) (188,880) Net change in cash and cash equivalents 1,108,610 (6,164,847) Cash and cash equivalents - beginning of the year 1,012,479 7,177,326 Cash and cash equivalents - end of the year$2,121,089 $1,012,479 Supplemental cash flow disclosures: Interest paid$143,101 $85,634 Income taxes paid$298,466 $91,707 Non-cash investing and financing transactions Finance lease right-of-use assets obtained in exchange for finance lease liabilities$- $93,217 Operating lease right-of-use assets obtained in exchange for operating lease liabilities$125,735 $317,040 Remeasurement of operating lease liabilities and right-of-use assets due to lease modification$23,956 $30,186 Insurance premium financing$172,689 $389,035 Common shares issued for acquisition of subsidiary$- $3,150,000 Warrants converted to marketable securities$6,443,276 $1,257,868 Note receivable converted to investment in equity securities$- $300,000

HeartCore Reports 2024 Financial Results

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