NEW YORK, April 22, 2022 /PRNewswire/ -- Argus Research, an independent investment research firm, has launched Equity Research Report coverage on HeartCore Enterprises, Inc. (NasdaqCM: HTCR)

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COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus Analyst Steve Silver) include:

HTCR: Helping Commercial Customers Manage Their Digital Interactions

  • In our view, HeartCore has developed a robust suite of commercial software programs enabling companies to manage digital interactions with users and customers. With an established customer base of over 800 major commercial and government customers in its domestic Japanese market, we see HeartCore as well positioned to roll out new products across this base, while also growing its nascent U.S. business.
  • Since its inception more than 12 years ago, HeartCore has developed and commercialized a customer experience management (CMX) platform, which accounted for approximately 80% of its 2021 revenues. Over the past four years, the company has developed a Digital Transformation (DX) platform for data mining, task mining, and robotic process automation, which we view as still in the early stages of customer adoption.
  • Over the coming years, we expect HeartCore to integrate its DX Platform further into its core CMX software, thus supporting its customers' shift to cloud computing, and also develop peripheral products around both platforms. Given our favorable view of steady 90%-plus retention rates for paying customers of its CMX business, we think the company is likely to improve the adoption of paying DX customers, as business conditions normalize following COVID-19 related disruptions, which reduced retention in that segment since 2020.
  • As of December 31, 2021, HeartCore had $3.1 million in cash on its balance sheet. Subsequently, the company raised more than $15 million in net proceeds from an initial public offering in February 2022. As a result, we view HeartCore as adequately funded to invest in its expansion into the U.S. market, build key personnel, and potentially engage in merger and acquisition (M&A) activities.
  • Based on our enterprise value (EV) to revenues analysis, we arrive at a fair value estimate of $6 per share.

INVESTMENT THESIS excerpts (Click Here to view full Argus Equity Research Report):

HeartCore Enterprises markets software for large commercial and governmental customers, that helps them secure and manage all digital customer interactions, as well as gain insights from, and partly automate, many work processes. The company has a significant installed user base of business and government agency customers, mostly in its domestic Japanese market. HeartCore is also at the very early stages of establishing a presence in the U.S. market.

As of December 31, 2021, HeartCore's total business had 839 total customers in Japan, of which 69% were paying customers. The balance consisted of non-paying or trial customers. Outside of Japan, the company had 24 customers, of which all but two were trial users.

HeartCore has over 12 years of experience with its flagship customer experience management software (CXM) platform, which helps large organizations effectively manage, update, and keep secure, all their digital interactions with customers. More recently, the company leveraged its experience in the commercial software market to create a complementary business, the DX Platform, which includes process analysis and task automation.

The company's customers include major global brands including Japan Airlines, Hitachi and Seibu Railway. We view its customer diversification favorably, noting that only one customer accounted for more than 10% of revenues in 2021.

HeartCore's CXM Platform includes content management software (CMS), which helps large corporate and government users create, manage, and modify content on their corporate websites. Such websites tend to be vast, consisting of over 100,000 pages of information that need to be kept current, thus requiring sophisticated content management software. HeartCore's CMS offering features a user-friendly interface, quick deployment, ease of maintenance, search engine optimization, and extendable functionality, among other features.

Its CXM platform accounted for 81.5% of total revenues in 2021 and showed solid growth in 2021, increasing by more than 28% to $8.8 million. We note that this growth rate exceeds the 10.7% segment growth rate seen in 2020. We are encouraged by the continued strong net retention rate of paying customers of HeartCore's CXM business, which has been approximately 95% in recent years. In our view, this customer "stickiness" positions the company to attract new customers, while adding new paid products to the installed base.

We view the global market for customer experience management software as large and fast growing. According to a 2020 report from Prescient & Strategic Intelligence, the global market for web content management software was $5.9 billion in 2019, with an expected ten-year compound annual growth rate over 18%. Thus, we see this segment as well positioned to continue to experience double-digit revenue growth, driven by expansion in both Japan and the U.S.

In our view, providing cyber-security for client websites is among the key selling points for the company's CMS offering. We note that this capability is of particular relevance to its government users, which often face sophisticated hacking schemes from hostile countries. Such websites have elevated security requirements for safeguarding customer, governmental, and corporate data and we believe this feature has been instrumental in securing wide acceptance in Japan.

Moreover, the CXM Platform offers significant functionalities beyond website content management. Its software helps companies to manage customer data and deliver personalized content based on users' behavior, device, location, and context. These capabilities include E-commerce, smartphone sites, smartphone apps, social networking services, blogs, and digital signage. We see the aggregation of user data and the ability to offer personalized advertising and content as a key driver of future growth for many technology products moving forward.

Building upon the success in its customer experience management business, HeartCore has developed a complementary business to address the growing shift towards automation solutions among many of its corporate and governmental clients, particularly in the accounting and human resources areas. HeartCore's Digital Transformation Business (DX Platform) addresses these market needs with software for robotics process automation, task mining, and process mining, which help customers automate many business functions, and generate measurable metrics through task mining and process mining technologies.

The DX Platform and other businesses generated approximately $2 million of revenues in 2021, representing 18.5% of the total. Although near-term customer retention results have varied in recent years, which we attribute to some customers cancelling contracts as a result of the COVID-19 pandemic, we expect the DX line to grow at a rate that will contribute up to 50% of total revenues in the future, as global business conditions continue to normalize.

Its Robotic Process Automation (RPA) software facilitates automation for HR and accounting. HeartCore's RPA software (robots) can emulate most human-computer interactions at high volume and speed, without human error. Common tasks that can automated by RPA include invoice processing, sales orders, account reconciliation, data entry for finance, human resources, manufacturing, supply chain, services, and procurement, payroll, employee onboarding, and data queries.

HeartCore's Task Mining software enables organizations to discover, understand, and analyze the tasks employees perform as they relate to completing larger processes. Task mining software monitors user actions through an installed recorder that captures application data such as keystrokes, clicks, and data entry, all of which can provide actionable insights for companies to improve processes and workflow, both manual and automated, to enhance operational efficiency, reduce errors, and improve employee engagement.

Like task mining, process-mining technologies can help improve processes on an enterprise level, with the ideal goal of automating them to enhance customer and employee experiences. Process mining technology investigates large volumes of enterprise event log data to discover and present end-to-end processes that the organization is performing to complete work and can lead to actionable suggestions on how to optimize and improve its processes.

As mentioned earlier, we believe customer "stickiness" in its core CMX platform positions HeartCore to add new products into its installed base of paying customers. Among its primary growth strategies is the integration of the DX Platform (including RPA, Task Mining, and Process Mining) with its core customer experience CMX platform. Management expects that many of its established CMX users will likely see value in its DX offering, which would provide significant cross-selling opportunities. We also note that to date, HeartCore has achieved growth despite a modest field sales organization consisting of only 16 employees. We think that expanded resources provided by the proceeds from its February 2022 initial public offering (IPO), should enable expansion of the company's sales infrastructure, which can drive long-term growth.

Another of HeartCore's growth strategies is to allow customers to try its software for free. The free (trial) version of the software has full functionality but can only be updated if the customer converts to paying status. We expect the expansion of its offering, including the integration of the two platforms to drive enhanced status of current trial users, over time.

HeartCore Enterprises, Inc. (NasdaqCM: HTCR)

HeartCore Enterprises is a software development company, providing software through two business units. The first business unit includes customer experience management, and the second business unit is a digital transformation business, which provides customers with robotics process automation, process mining and task mining. The company is based in Tokyo, Japan.

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About Argus Research Corp. 

Headquartered in NYC, Argus Research ( is a leading independent equity research firm (est. 1934)  ̶  providing fundamental and quantitative research coverage on more than 1,600 companies across all 11 sectors of the S&P 500, as well as macroeconomic and equity market forecasts, thematic research, model portfolios and pre-IPO research.  In addition, Argus has recently committed to providing a sponsored research solution for small & mid-cap companies seeking coverage.  Argus's Equity Research & earnings estimates are available on major research / earnings estimate aggregator platforms, including Bloomberg, Thomson Reuters, Factset and S&P Global.

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Argus Research Co. has received a flat fee from the company discussed in this report as part of a Sponsored Research agreement between Argus and the company. No part of Argus Research's compensation is directly or indirectly related to the content of this assessment or to other opinions expressed in this report. Please refer to the full Argus report and the disclaimer for complete disclosures.


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