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)
Click Here to view full Argus Equity Research Report.
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)
https://heartcore-enterprises.com
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.
For more information please contact:
Gateway Group, Inc.
Matt Glover and John
Yi
HTCR@gatewayir.com
(949) 574-3860
About Argus Research Corp.
Headquartered in NYC, Argus Research (www.argusresearch.com) is
a leading independent equity research firm (est. 1934) ΜΆ
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
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For more Information please contact:
Darrell Stone
646-747-5438
dstone@argusresearch.com
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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