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Netcapital Inc. (NCPL)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 revenue grew 34% year over year to $190,058, driven primarily by portal fees and a 1% equity fee; EPS improved to ($1.27) from ($5.10) YoY, while operating loss widened to ($3.29) million due to higher payroll and legal costs .
  • Revenue was heavily concentrated: one issuer contributed 73% after raising ~$5 million between March 24–May 30, 2025, highlighting client concentration risk .
  • Liquidity bolstered by capital raises (registered direct offerings totaling ~$8 million gross in July) and ATM activity; cash reached $4.56 million at quarter-end, but management disclosed substantial doubt about going concern given negative operating cash flow and need for additional financing .
  • Strategic initiatives advanced: formation of Crypto and Game advisory boards and a perpetual software license (Horizon Globex) to enable secondary trading services; management reiterated a pivot away from equity-based consulting toward scalable, cash-generating fintech and broker-dealer services .
  • No formal financial guidance provided; S&P Global consensus estimates for EPS and revenue appear unavailable for NCPL, limiting beat/miss analysis versus Street expectations (S&P Global data unavailable).

What Went Well and What Went Wrong

  • What Went Well
    • YoY revenue growth of 34% with improved EPS to ($1.27) from ($5.10), reflecting mix shift to portal fees and equity fee income .
    • Strategic milestones: Crypto Advisory Board and Game Advisory Board to pursue blockchain/DeFi integration and community engagement; “positions us to play a larger role in fintech” (CEO) .
    • Liquidity actions: two July registered direct offerings (~$5.0M and $3.0M gross) and ATM use ($0.97M gross) increased cash to $4.56M at Q1-end .
  • What Went Wrong
    • Operating loss widened to ($3.29)M, driven by a 58% increase in payroll and ~14% increase in G&A, with legal fees of ~$1.08M (60% regulatory-related) in the quarter .
    • Customer concentration risk intensified: one issuer accounted for 73% of quarterly revenue; fewer new offerings launched (5 vs. 13 YoY) and fewer final closings (3 vs. 11 YoY) .
    • Going concern warning: net cash used in operations of $4.21M and management’s conclusion of substantial doubt about continuing as a going concern absent further financing .

Financial Results

MetricQ2 2025 (Oct 31, 2024)Q3 2025 (Jan 31, 2025)Q1 2026 (Jul 31, 2025)
Revenue ($USD)$170,528 $152,682 $190,058
Gross Profit ($USD)$150,747 N/A$182,649
Costs of Services ($USD)$19,781 N/A$7,409
Operating Income (Loss) ($USD)($2,202,431) ($1,687,692) ($3,285,648)
Net Income (Loss) ($USD)($2,220,501) ($3,006,537) ($3,642,052)
Diluted EPS ($USD)($2.34) ($1.57) ($1.27)
Gross Margin (%)88.4% (GP/Rev) N/A96.1% (GP/Rev)
Operating Margin (%)(1,291.1%) (Op/Rev) (1,105.7%) (Op/Rev) (1,728.8%) (Op/Rev)

YoY Comparison (Q1 2026 vs Q1 2025):

MetricQ1 2025 (Jul 31, 2024)Q1 2026 (Jul 31, 2025)YoY Change
Revenue ($USD)$142,227 $190,058 +34%
Operating Loss ($USD)($2,508,237) ($3,285,648) Worse by ~$0.78M
Diluted EPS ($USD)($5.10) ($1.27) Improved by $3.83

KPIs and Revenue Mix:

KPI / Revenue SourceQ1 2025Q1 2026
Portal Fees ($USD)$89,429 $122,728
Listing Fees ($USD)$42,500 $5,000
Portal 1% Equity Fee ($USD)$10,127 $62,195
Game Website Revenue ($USD)$135,171 $0
Offerings Launched (count)13 5
Final Closings (count)11 3
Customer ConcentrationOne customer 15% of rev One customer 73% of rev

Balance Sheet / Liquidity Highlights:

MetricQ4 2025 (Apr 30, 2025)Q1 2026 (Jul 31, 2025)
Cash & Cash Equivalents ($USD)$289,428 $4,562,491
Total Debt ($USD)$2,683,561 $3,020,124
Working Capital ($USD)($5,096,155) $186,766

Estimates vs. Actuals:

MetricQ1 2026 ConsensusQ1 2026 Actual
Revenue ($USD)N/A (S&P Global consensus unavailable)*$190,058
Primary EPS ($USD)N/A (S&P Global consensus unavailable)*($1.27)

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2026/Q2-Q4None providedNone providedMaintained (no guidance)
EPSFY2026None providedNone providedMaintained (no guidance)
Margins/OpEx/TaxFY2026None providedNone providedMaintained (no guidance)
SegmentFY2026Single segmentSingle segmentMaintained
DividendsFY2026NoneNoneMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 FY2025)Current Period (Q1 FY2026)Trend
Broker-dealer expansion (FINRA approval)FINRA approval received; focus on Reg A/Reg D opportunities, fee structures (Q2 call) Continued emphasis on scalable broker-dealer services Consistent; execution focus
Secondary trading / ATSTechnical build complete; regulatory framework delays (Q2 call) Perpetual Horizon Globex license to support secondary trading services Advancing tooling; regulatory path still key
Blockchain/crypto/DeFi initiativesGeneral intent; exploring integration (Q4 call) Crypto Advisory Board; intent to integrate blockchain/digital assets with traditional finance Escalating commitment
Revenue mix and client concentrationSevere YoY declines and consulting pullback (Q2/Q3 PR) Revenue growth, but 73% from one issuer; shift to portal/equity fees Mix improving; concentration risk rising
Regulatory/legal costs/controlsHigh legal costs; Q4 Q&A concern; internal control weaknesses (material weakness; significant deficiency) Legal costs elevated; remediation ongoing; controls not yet effective Persistent headwind
Liquidity / financingNo Reg CF consulting; Q2/Q3 operating losses July offerings (~$8M gross) and ATM improved cash; going concern still flagged Liquidity improved; structural cash burn continues

Management Commentary

  • “We began our fiscal year 2026 with revenue growth of more than 30% for the first quarter… encouraged to see our vision taking shape.” — Martin Kay, CEO .
  • “We established a Crypto Advisory Board… integrating blockchain, digital assets and crypto with traditional finance… explore opportunities in decentralized finance.” — Martin Kay, CEO .
  • “One issuer that accounted for 73% of our revenues… successfully raised approximately $5 million from March 24, 2025, to May 30, 2025.” — Coreen Kraysler, CFO .
  • “Moving away from equity-based consulting revenue to focus on building a stronger, more scalable business.” — Martin Kay, CEO (prepared remarks) .

Q&A Highlights

  • Q1 FY2026 call featured prepared remarks and no substantive Q&A; the operator concluded the Q&A without questions, reflecting limited analyst engagement this quarter .
  • Context from prior quarter: investors challenged sustainability, legal cost levels, and asked about strategic pivots; management emphasized broker-dealer/regulatory realities and disciplined blockchain integration (Q4 FY2025 call) .

Estimates Context

  • S&P Global consensus estimates for NCPL were not available for Q1 FY2026 EPS or revenue; therefore, beat/miss analysis versus Street is not possible for this quarter. Values retrieved from S&P Global.
  • Given unavailable consensus, focus shifts to internal drivers: portal fee growth, 1% equity fee, and customer concentration; near-term estimate revisions (if any) would likely reflect elevated OpEx and regulatory/legal costs alongside improved cash .

Key Takeaways for Investors

  • Revenue improved YoY with better EPS, but operating loss widened on higher payroll and legal costs; watch expense discipline and remediation of internal controls (material weakness, significant deficiency) .
  • Customer concentration is acute (73% of revenue from one issuer); monitor diversification (new offerings launched: 5 vs. 13 YoY; final closings: 3 vs. 11 YoY) to reduce dependency risk .
  • Liquidity strengthened via ~$8M gross capital raises and ATM activity; cash $4.56M at quarter-end, but going concern risk persists due to negative operating cash flow and need for additional financing .
  • Strategic shift is tangible: broker-dealer capabilities and Horizon license for secondary trading; Crypto/Game advisory boards signal an innovation agenda anchored in blockchain/DeFi and community engagement .
  • Near-term trading implications: narrative likely driven by client concentration, legal/regulatory costs, and going concern disclosure; upside catalysts include deal flow in Reg A/Reg D and secondary trading rollout .
  • Medium-term thesis: if management executes on scalable fee-based services and secondary market functionality while diversifying issuers and controlling expenses, improved unit economics are plausible; failure to curb cash burn or broaden revenue base heightens dilution and solvency risks .
  • No formal guidance or Street consensus available; prioritize tracking portal fee growth, offering pipeline, and regulatory milestones for secondary trading capabilities .