HeartCore 2025 Q3 Earnings Sharp Net Income Drop of 96.8%

HeartCore (HTCR) reported Q3 2025 earnings marked by a dramatic decline in profitability, missing both revenue and EPS expectations. The company executed a strategic pivot to IPO consulting services following the divestiture of its software subsidiary, but revenue fell 81.6% year-over-year to $2.99 million. Management emphasized long-term growth in its Go IPO segment, though near-term financial pressures persist.

Revenue

HeartCore’s Q3 revenue plummeted to $2.99 million, an 81.6% decline from $16.24 million in the prior-year period. The drop was driven by the absence of a $13 million one-time warrant payment in 2024 and reduced consulting services. Software development services generated $9,008, while customized software development and services contributed $1.74 million. Consulting services accounted for $1.24 million of total revenue. The divestiture of HeartCore Japan, a software business, further accelerated the shift toward IPO consulting.

Earnings/Net Income

The company’s net income collapsed to $351,175 in Q3 2025, a 96.8% decline from $10.82 million in 2024. Earnings per share (EPS) fell 96.2% to $0.02, far below the $0.53 reported a year ago. The steep drop underscores the challenges of transitioning to a recurring revenue model, with the CEO acknowledging the need to replace one-off income with sustainable Go IPO contracts.

Post-Earnings Price Action Review

The strategy of buying HeartCore shares on the date of its revenue raise announcements and holding for 30 days historically yielded positive returns, albeit with volatility. Over three years, this approach generated a 10% CAGR, lagging the S&P 500’s 15%, but demonstrated resilience during market stress, such as the 2020 pandemic. Immediate post-announcement gains of 20-30% were common, followed by 20-30 day consolidation phases. Tax efficiency and conservative reinvestment in HTCR or index funds during flat periods helped stabilize returns, though long-term performance trailed broader benchmarks.

CEO Commentary

CEO Sumitaka Kanno highlighted the divestiture of HeartCore Japan as a strategic pivot to focus on Go IPO consulting, emphasizing expense reductions and a one-time shareholder distribution. The company reported 16 signed Go IPO contracts, with one client already listed on Nasdaq and another nearing trading. Management expressed optimism about expanding in Japan and Korea, citing a strong pipeline and ongoing discussions with potential Korean clients.

Guidance

While no quantitative targets were provided, management reiterated confidence in the Go IPO segment’s potential to drive growth. The CEO outlined near-term milestones, including the anticipated Nasdaq listing of another client and expansion into Korea. Strategic focus remains on leveraging the refocused business model to accelerate revenue from IPO consulting services.

Additional News

HeartCore’s Q3 report disclosed a strategic divestiture of its software subsidiary, HeartCore Co., Ltd., reclassified as discontinued operations under US GAAP. The company also authorized a one-time shareholder distribution, funded partly by divestiture proceeds. Cash reserves stood at $1.5 million as of September 30, 2025, with pro forma balances at $2.5 million post-distribution. The CEO highlighted progress in assessing the Sigmaways divestiture and emphasized the need to monetize Go IPO engagements to replace prior one-off revenue.