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Netcapital Inc. (NCPL)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue declined 92% year-over-year to $170,528, but improved 20% sequentially; EPS was ($2.34), with operating loss of ($2,202,431) and net loss of ($2,220,501) .
  • Sequential improvement was driven by funding portal activity, while the YoY decline reflected a sharp slowdown in consulting revenue; gross profit was $150,747 on cost of services of $19,781 .
  • Strategic milestone: Netcapital Securities Inc. received FINRA broker-dealer approval in November, enabling Reg A/Reg D offerings and fee participation, a key future revenue lever .
  • Secondary trading platform launch timing slipped; management is still working through regulatory details and did not provide formal guidance ranges for revenue or margins .
  • No Wall Street consensus estimates were available via S&P Global for Q2 2025; estimate comparisons are therefore unavailable.

What Went Well and What Went Wrong

What Went Well

  • Sequential revenue growth (+20% QoQ to $170,528) driven by funding portal business; gross profit of $150,747 and cost discipline on cost of services ($19,781) .
  • FINRA broker-dealer approval opens new fee-based revenue channels (Reg A/Reg D, syndication, fee-sharing), positioning the platform for larger fundraises; “This is a major milestone…” (Martin Kay) .
  • Management emphasizes pivot away from noncash consulting revenue toward broker-dealer monetization: “We’ve not been pursuing equity-based revenue contracts… opens new opportunities for more revenue streams” (Martin Kay) .

What Went Wrong

  • Revenue collapsed YoY (down ~92%) on consulting revenue slowdown; swing from operating income ($52,220) and net profit ($339,616) in Q2 2024 to operating loss ($2.20M) and net loss ($2.22M) in Q2 2025 .
  • Operating expenses remained elevated (total costs and expenses $2,353,178), pressuring margins and cash flow despite very low revenue base .
  • Secondary trading platform rollout delayed; management unable to provide timeline, citing regulatory framework work: “I don’t think I can confidently predict that at this point” (Martin Kay) .

Financial Results

Income Statement and Key Metrics (YoY and QoQ)

MetricQ2 2024Q1 2025Q2 2025
Revenue ($)$2,041,658 $142,227 $170,528
Cost of Services ($)$20,134 $10,220 $19,781
Gross Profit ($)$2,021,524 $132,007 $150,747
Operating Income (Loss) ($)$52,220 ($2,508,237) ($2,202,431)
Net Income (Loss) ($)$339,616 ($2,527,170) ($2,220,501)
EPS (Basic/Diluted) ($)$2.52 / $2.52 ($5.10) / ($5.10) ($2.34) / ($2.34)
Cash and Equivalents ($)n/a$855,181 $1,346,739

Margins

MetricQ2 2024Q1 2025Q2 2025
Gross Profit Margin (%)99.0% (derived from revenue and gross profit) 92.8% (derived) 88.4% (derived)

Balance Sheet Highlights

MetricQ1 2025Q2 2025Q3 2025
Accounts Payable ($)$1,180,487 $1,815,823 $2,160,727
Equity Securities ($)$25,343,513 $25,358,261 $24,073,080
Total Stockholders’ Equity ($)$37,508,453 $37,406,323 $34,970,265

KPIs (Platform/Operational)

KPIQ1 2025Q2 2025Q3 2025
Investor Accounts (approx.)n/a“over 115,000” n/a
Cash and Equivalents ($)$855,181 $1,346,739 $614,304

Notes:

  • YoY figures refer to quarter ended October 31, 2023 vs October 31, 2024, as disclosed in the Q2 FY25 press release and attached statements .
  • No Street estimates available via S&P Global for Q2 2025; estimate comparison not provided.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025Not provided Not provided Maintained (no formal guidance)
Margins (Gross/Operating/Net)FY 2025Not provided Not provided Maintained (no formal guidance)
Secondary Trading Platform LaunchCalendar 2024Previously discussed expectation to launch by YE’24 Timing TBD; still working through regulatory details Lowered (delayed)
Broker-Dealer Monetization (Reg A/Reg D)FY 2025+Application in process FINRA approval secured; pursuing larger, fee-based offerings Raised (strategic capability)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025 and Q3 2025)Current Period (Q2 2025)Trend
Broker-Dealer (NSI)Applied for FINRA registration (Q1); later approved and engaged by Algernon NeuroScience for planned Reg A (Q3) Approval announced; focus on Reg A/Reg D fees and deal syndication Improving (execution progress)
Secondary Trading Platform (Templum ATS)Beta launch for closed users; regulatory caveats (Q1) Technical build complete, but launch delayed; regulatory framework still being finalized Slipping (timeline delay)
Revenue Mix ShiftQ1 revenue decline driven by lower consulting services; funding portal contributions disclosed Sequential growth driven by funding portal; deemphasizing equity-based consulting Transitioning (toward fee-based BD revenues)
Operating Costs and ProfitabilityQ1: operating loss ($2.51M) and net loss ($2.53M) Q2: operating loss ($2.20M) and net loss ($2.22M); cost base still heavy vs revenue Mixed (losses persist)
Issuer/Investor BasePlatform ecosystem and investor accounts emphasized across periods “Over 115,000 investor accounts”; digital marketing relationships highlighted Stable to improving (ecosystem scale)

Management Commentary

  • Strategic pivot: “We’ve not been pursuing equity-based revenue contracts… opens new opportunities for more revenue streams” (Martin Kay) .
  • Broker-dealer revenue opportunity: “Reg A… up to $75 million in a 12-month period… structure a fee arrangement likely a percentage… something that we plan to pursue” (Martin Kay) .
  • Platform differentiation: “We’ve disclosed over 115,000 investor accounts… unique to the equity crowdfunding industry versus traditional broker-dealer activities” (Martin Kay) .
  • Caution on secondary trading: “Still working through… regulatory framework… prudent… not do anything before we feel 100% comfortable” (Martin Kay) .

Q&A Highlights

  • Capital structure and shares: management indicated ~1.8 million shares outstanding; warrants detail not provided on the call .
  • Portfolio NAV: equity securities portfolio value cited “a little over $25 million,” consistent with balance sheet carrying value ($25,358,261) .
  • BD monetization and pipeline: management expects percentage-fee economics on larger Reg A deals; specific deal sizes/timing not disclosed .
  • Secondary trading timing: prior suggestion of ‘24 launch has slipped; timing now TBD due to regulatory considerations .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q2 2025 were unavailable at the time of this analysis; comparisons to Street expectations cannot be provided.
  • Given the lack of estimates, focus shifts to sequential trajectory and strategic milestones in assessing near-term setup .

Key Takeaways for Investors

  • Revenue base is currently small and volatile, but sequential improvement and the BD approval create a path to fee-based revenues from larger Reg A/Reg D offerings, potentially transforming monetization dynamics over the medium term .
  • The dramatic YoY revenue decline reflects the pivot away from noncash consulting arrangements; the investment portfolio ($25.36M carrying value) is notable but subject to market/impairment risk (as seen in Q3) .
  • Operating losses remain substantial relative to revenue; watch for cost actions and evidence of BD-led revenue traction to improve operating leverage .
  • Secondary trading launch is delayed; regulatory clarity is the gating factor—any definitive timeline or launch could be a stock catalyst .
  • Near-term trading setup: headlines tied to BD deal mandates, Reg A engagements, or platform launches are likely to drive sentiment; absence of formal guidance keeps dispersion high .
  • Medium-term thesis: execution on BD monetization, issuer acquisition, and investor engagement should be prioritized; monitor cash trends and payables as indicators of financial flexibility .
  • With no accessible Street estimates via S&P Global, investor framing should center on sequential momentum, strategic milestones, and cost discipline to gauge progress.

Sources: Q2 FY2025 8-K and press release ; Q2 FY2025 earnings call transcript ; FINRA approval press release ; Q1 FY2025 8-K press release ; Q3 FY2025 8-K press release .