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Netcapital Inc. (NCPL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 revenue was $0.153M, down 85% YoY on the absence of equity-for-services consulting revenue and down ~10% QoQ; operating loss was $1.69M, and net loss was $3.01M ($-1.57 EPS) .
  • Management emphasized the strategic milestone of FINRA approval for its wholly owned broker-dealer (Netcapital Securities, Inc., “NSI”) and highlighted its first visible engagement (Algernon NeuroScience Reg A), positioning new revenue channels beyond legacy consulting .
  • Results were further impacted by a $1.3M impairment on a portfolio company taken in the quarter, overshadowing otherwise lean cost of services and high gross margins .
  • No formal guidance was provided; near-term stock narrative likely hinges on monetization of the broker-dealer, progression of Reg A/Reg D pipelines, and any secondary trading commercialization updates rather than backward-looking Q3 fundamentals .

What Went Well and What Went Wrong

  • What Went Well

    • Broker-dealer catalyst: “NSI is now approved to… handle private placements… support Reg A and Reg D… partner with other broker-dealers,” expanding monetization avenues beyond consulting .
    • Early BD traction: NSI engaged by Algernon NeuroScience for a planned Reg A offering, a first concrete sign of pipeline conversion .
    • Cost discipline in delivery: Cost of services was just $7K with gross profit of $146K on $153K of revenue, reflecting a 95.3% gross margin in the quarter (mix-driven) .

  • What Went Wrong

    • Sharp revenue contraction: Revenue fell 85% YoY to $0.153M due to the lack of consulting service revenue for equity securities vs. $0.863M of such consulting revenue in Q3 FY2024 .
    • Profitability deterioration: Net loss widened to $3.01M, including a $1.3M impairment charge related to a portfolio company; operating loss was $1.69M .
    • Liquidity down QoQ: Cash and equivalents declined to $0.614M at Jan 31 from $1.347M at Oct 31, highlighting the importance of near-term BD monetization .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($)$1,042,793 $142,227 $170,528 $152,682
Gross Profit ($)$983,918 $132,007 $150,747 $145,527
Gross Margin (%)94.4% 92.8% 88.5% 95.3%
Operating Income (Loss) ($)($1,205,157) ($2,508,237) ($2,202,431) ($1,687,692)
Operating Margin (%)-115.6% -1,764.0% -1,291.3% -1,106.0%
Net Income (Loss) ($)($2,227,542) ($2,527,170) ($2,220,501) ($3,006,537)
Diluted EPS ($)($13.60) ($5.10) ($2.34) ($1.57)
Cash & Equivalents ($)n/a$855,181 $1,346,739 $614,304

Notes:

  • Management attributed the YoY revenue decline to the absence of equity-for-services consulting revenue in Q3 FY2025; Q3 FY2024 included ~$0.862M of such consulting revenue .
  • Q3 FY2025 includes a $1.3M impairment expense; cost of services was $7K .

Segment and KPIs

  • Segment breakdown: Not disclosed; the company reports consolidated results without segment detail in the press release/8-K .
  • Selected balance sheet datapoint: Accounts payable increased to $2.16M vs. $0.79M at Apr 30, 2024; total liabilities were $4.93M at Jan 31, 2025 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal financial guidance (revenue, EPS, margins)FY2025/near termn/aNo formal quantitative guidance provided; management focused commentary on NSI capabilities and pipeline n/a

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Broker-dealer (NSI) statusQ1: Filed FINRA BD application; positioning for Reg A/Reg D revenues and secondary trading beta via Templum ATS . Q2: FINRA approval obtained for NSI, opening additional revenue channels .NSI approved; scope includes private placements, Reg A/Reg D support, and partnering with other BDs; highlighted first visible engagement (Algernon Reg A) .Positive progression from application → approval → initial engagement.
Revenue mix/consultingQ1: Decrease in equity-for-services revenue drove the miss . Q2: YoY revenue decline primarily from consulting slowdown .No equity-for-services consulting revenue in Q3; primary reason for YoY revenue drop .Pressure persists; pivot to BD monetization ongoing.
Secondary tradingQ1: Beta launch announcement via Templum ATS to a closed group (regulatory-dependent) .No update in Q2 PR; focus shifted to BD approval .No Q3 update in call/PR; remains a potential future lever .
Macro/tone“Challenging quarter” narrative; building groundwork (Q1) .“Tough quarter… optimistic about future” (Q2) .“Tough time… cautious optimism” (Q3) .
Impairments/portfolioNot discussed in Q1/Q2 press releases .$1.3M impairment recorded in Q3 on a portfolio company .New headwind this quarter.

Management Commentary

  • “We did face a tough quarter during an uncertain market environment.” — Martin Kay, CEO .
  • “NSI is now approved to do 3 things: handle private placements… support companies raising equity capital under Reg A and Reg D… [and] partner with other broker-dealers.” — Martin Kay .
  • “The decline in revenue was attributed to the lack of consulting service revenue for equity securities in Q3 2025 as compared to… Q3 2024.” — Coreen Kraysler .
  • “We are pleased that Algernon NeuroScience Inc. recently engaged Netcapital Securities for a planned Regulation A (Reg A) offering…” — Martin Kay .

Q&A Highlights

  • The operator reported no questions in the queue; prepared remarks ended without additional guidance or new quantitative targets .
  • Management reiterated focus on ramping NSI capabilities and pipeline; no specific revenue/EPS outlook was provided .

Estimates Context

  • Wall Street consensus: S&P Global showed no available consensus for Q3 FY2025 EPS or revenue at the time of analysis; thus, no beat/miss vs. estimates can be assessed (consensus unavailable)*.
  • Actuals: Revenue $0.153M; EPS ($1.57) .

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY/Near-termn/aNo formal guidance given n/a
EPSFY/Near-termn/aNo formal guidance given n/a
Margins/OpEx/tax/segmentFY/Near-termn/aNo formal guidance given n/a

Key Takeaways for Investors

  • The quarter was weak on legacy revenue (no equity-for-services consulting), but strategic positioning improved with NSI’s FINRA approval and initial client engagement—near-term narrative now hinges on BD monetization rather than historical consulting .
  • Impairment ($1.3M) compounded losses; excluding impairments, operating loss still reflects scale constraints vs. revenue; monitoring pipeline conversion is critical .
  • Liquidity contracted QoQ (cash $0.614M vs. $1.347M in Q2), increasing urgency to convert pipeline and manage working capital .
  • Gross margins remain high due to revenue mix/cost structure, but absolute revenue scale is the central issue; watch for Reg A/Reg D deal counts and fee economics per deal as NSI ramps .
  • No formal guidance; catalysts to watch include additional NSI mandates, any secondary trading commercialization updates, and stabilization in core funding portal activity .
  • Given micro-cap dynamics and thin estimate coverage, price action may be driven by discrete BD deal announcements and regulatory/commercial milestones rather than quarterly beats/misses*.

*Consensus data unavailable on S&P Global for Q3 FY2025; Values retrieved from S&P Global.

Supporting documents and sources:

  • Q3 FY2025 press release and 8-K: revenue, P&L, balance sheet, and management quotes .
  • Q3 FY2025 earnings call transcript: drivers (consulting revenue absence), impairment, NSI capabilities .
  • Q2 FY2025 press release: comparative revenues, cash, narrative .
  • Q1 FY2025 press release: comparative revenues, narrative (BD application, secondary trading beta) .
  • Algernon NeuroScience engagement with NSI (Reg A) .