Sign in

You're signed outSign in or to get full access.

NI

Netcapital Inc. (NCPL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 revenue fell 91% year over year to $142,227, driven by the cessation of consulting services for equity securities; net loss widened to $(2,527,170) and diluted EPS was $(5.10) .
  • Management emphasized strategic repositioning: beta launch of the secondary trading functionality via Templum ATS and the broker-dealer application to enable Reg A/Reg D fees and larger fundraises .
  • Liquidity remained tight with cash and equivalents of $855,181; management disclosed an operating burn rate “$300,000+ per month,” and the 10-Q flagged substantial doubt about going concern .
  • Subsequent event: the company entered an ATM facility (up to $2.1M) and regained Nasdaq bid-price compliance following a 1-for-70 reverse split—key near-term stock narrative drivers alongside ATS launch timing and initial broker-dealer monetization .
  • No Wall Street consensus estimates were available via S&P Global for Q1 FY2025; results should be judged against internal execution milestones rather than estimate beats/misses.

What Went Well and What Went Wrong

What Went Well

  • Introduced beta version of secondary trading functionality through Templum ATS, aimed at providing potential liquidity to funding-portal investors: “launch of our beta version of a secondary trading platform through the Templum ATS to a closed group of users” .
  • Strategic pivot to broker-dealer: “we announced that our wholly-owned subsidiary, Netcapital Securities Inc. applied for broker-dealer registration… to expand our revenue base by hosting and generating additional fees from Reg A+ and Reg D offerings” .
  • Corporate mechanics to support capital access and listing status: ATM agreement initiation and “regained compliance with Nasdaq’s Listing Rule 5550(a)(2)” following the reverse split .

What Went Wrong

  • Revenue collapse: zero consulting-for-equity revenue versus $1.11M in the prior year; total revenue down 91% YoY to $142,227; funding portal revenue down ~62% YoY to $142,056 .
  • Operating loss expanded to $(2,508,237), EBIT margin of approximately −1,764% on minimal revenue scale; G&A rose ~75% YoY from legal/proxy costs .
  • Platform KPIs deteriorated: total dollars raised decreased ~60% to ~$1.17M, listing fees fell ~72% due to salesforce turnover; negative working capital and going concern warning .

Financial Results

MetricQ1 2025 (ended Jul 31, 2024)Q2 2025 (ended Oct 31, 2024)Q3 2025 (ended Jan 31, 2025)
Revenue ($USD)$142,227 $170,528 $152,682
Gross Profit ($USD)$132,007 $150,747 $145,527
Gross Profit Margin (%)92.9% (132,007/142,227) 88.4% (150,747/170,528) 95.3% (145,527/152,682)
Operating Income (Loss) ($USD)$(2,508,237) $(2,202,431) $(1,687,692)
EBIT Margin (%)−1,764.0% (−2,508,237/142,227) −1,292.0% (−2,202,431/170,528) −1,106.0% (−1,687,692/152,682)
Net Income (Loss) ($USD)$(2,527,170) $(2,220,501) $(3,006,537)
Diluted EPS ($)$(5.10) $(2.34) $(1.57)
Cash and Equivalents ($USD)$855,181 $1,346,739 $614,304

Segment/revenue composition (Q1 FY2025 vs prior year):

Revenue ComponentQ1 2025 ($USD)Q1 2024 ($USD)
Consulting services for equity securities$0 $1,110,000
Consulting revenue$0 $33,700
Portal fees (4.9%)$89,429 $221,856
Listing fees$42,500 $154,000
Portal 1% equity fee$10,127 $0
Total Revenue$142,227 $1,519,809

KPIs and operating metrics:

KPIQ1 2025Q1 2024
Total funds raised on Funding Portal ($USD)~$1,169,917 ~$2,960,761
Successful final closings (count)11 4
Cash and equivalents ($USD)$855,181 $1,030,618 (end of period prior year, cash flow statement)
Weighted avg basic shares (count)495,319 106,732

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Financial guidance (Revenue/EPS/margins)FY2025/Q1None providedNone providedMaintained: no formal guidance
Operating burn rateOngoingNot explicitly quantified prior“$300,000+ per month” (disclosed in Q&A) New disclosure signal
ATM program usage disclosureOngoingN/AWill disclose usage in quarterly filings; no press releases for partial usage Policy clarification
Broker-dealer statusFY2025Application in process (Q1) FINRA approval achieved by Q2 (subsequent) Raised: regulatory milestone

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2025)Previous Mentions (Q-1: Q2 2025)Current Period (Q1 2025)Trend
Secondary trading (Templum ATS)Impairment/market challenges; focus on BD; no launch timeline; ongoing regulatory work Technical build complete; launch pushed beyond CY2024; regulatory details pending Beta launched to closed group; timeline uncertain; regulatory constraints; intent to list portal issuers Progress on beta; launch timing remains uncertain
Broker-dealer (Reg A/Reg D)FINRA approval achieved; plan to monetize larger raises and fee sharing FINRA approval received; differentiation vs traditional BD; potential % fee model Application submitted; strategic rationale for diversified revenues Milestone achieved post-Q1; monetization next
Liquidity/capital accessCash $614k; impairment hit; dilution concerns persist Cash $1.35M; ATM in place; shares outstanding ~1.8M Cash $855k; ATM initiated; regained Nasdaq via reverse split Tight liquidity; tools in place; dilution risk
Portal performanceRevenue down YoY; operating loss narrower QoQ Sequential revenue increase vs Q1; YoY decline Funds raised down ~60% YoY; listing fees down due to sales turnover Mixed; YoY weak; sequential improvement in Q2
Regulatory/legalRoutine inquiries; compliance costs; going concern risk Regulatory clarity needed for ATS; FINRA BD approval ATS subject to regulation; BD application pending in Q1 Elevated regulatory engagement continues

Management Commentary

  • CEO (press release): “This was a challenging quarter… decrease in revenues for services… in exchange for equity securities… we… applied for broker-dealer registration… [and] launched… beta… secondary trading platform through the Templum ATS” .
  • CEO (call): “It’s important for us to maintain our NASDAQ listing… we remain committed to our vision of empowering entrepreneurs and investors…” .
  • CFO (call): “We had no revenues from equity-based contracts… revenue from portal fees decreased… total funds raised decreased by almost $1.8 million or approximately 60%” .
  • CFO (Q&A): “We’ve said in the past that our burn rate is $300,000 plus a month” .
  • CEO (Q&A): On ATS timing: “we hope to be able to launch before the end of this calendar year… factors… beyond our control with respect to regulations” .

Q&A Highlights

  • ATS launch timing pressed by analysts; management reiterated regulatory dependencies and avoided firm timelines; intent is to enable trading in portal-listed securities upon launch .
  • ATM usage disclosure clarified: no PRs for partial usage; usage will appear in quarterly filings—important for dilution tracking .
  • Burn rate quantified at $300k+ per month, with goal to offset via broker-dealer monetization over time .
  • Insider buying constrained due to fundraising and regulatory limitations, per CFO .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2025 was unavailable; results cannot be evaluated versus consensus EPS/revenue estimates in this instance. Given micro-cap status and business pivot, coverage appears limited.

Key Takeaways for Investors

  • Execution, not estimates, will drive the stock: near-term catalysts are FINRA broker-dealer monetization (Reg A/Reg D pipeline, fee-based revenues) and clarity on ATS full launch timing and initial volumes .
  • Revenue mix has structurally shifted away from consulting-for-equity to portal/fee-based activity; expect lower reported revenue unless larger Reg A/Reg D deals are onboarded—monitor listing flow and average raise per issuer .
  • Liquidity is tight and dilution risk non-trivial: ATM facility in place; watch quarterly filings for usage and share count changes, and monitor cash runway versus disclosed burn rate .
  • Operational efficiency is critical: G&A escalation weighed on EBIT; management reductions and salesforce rebuild for listing fees are key to improving portal throughput .
  • Balance sheet carries material Level 3 investments in early-stage issuers; mark-to-market or impairments (as seen in FY2024 and Q3 FY2025) can drive volatility in retained earnings and sentiment—track observable price changes in holdings .
  • Regulatory engagement remains elevated; any delays to ATS or BD activities can push out monetization; conversely, initial Reg A mandates (e.g., Algernon NeuroScience engagement post-Q1) could validate the strategy .
  • Trading implications: be alert to filings on ATM usage and ATS launch announcements; a definitive ATS go-live and first broker-dealer revenue events are likely stock-moving catalysts, while prolonged delays or further impairments could pressure shares .