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 .