Earnings call transcript: Netcapital Q4 2025 sees revenue plunge, strategic pivot

Netcapital Inc. (NCPL) reported significant financial challenges in its Q4 2025 earnings call, revealing a steep decline in revenue and an increased net loss. Despite these setbacks, the company is pivoting towards a technology-driven strategy, focusing on blockchain integration and expanding its Reg A offerings. The stock saw a modest increase of 0.76% in regular trading, closing at $2.62. According to InvestingPro analysis, NCPL appears undervalued based on its Fair Value calculation, though investors should note the stock’s high volatility and recent -13.82% decline over the past week.

Key Takeaways

• Revenue dropped sharply to $869,460 in FY2025 from $4.9 million in FY2024.
• Net loss widened to $28.3 million, up from $4.9 million the previous year.
• Netcapital is shifting focus to scalable, technology-driven services and blockchain integration.
• The company discontinued equity-based consulting services to streamline operations.
• Regulatory challenges continue to pose a significant hurdle in the fintech sector.

Company Performance

Netcapital faced a challenging fiscal year, with revenues plummeting by over 80% and a substantial increase in operating losses. The company’s strategic pivot towards integrating blockchain and digital assets with traditional finance marks a significant shift in its business model. This transition comes amid a difficult macroeconomic environment and regulatory uncertainties in the fintech and crypto sectors. InvestingPro data reveals concerning fundamentals, with an EBITDA of -$7.94M and a weak Financial Health Score, suggesting significant operational challenges. For deeper insights into NCPL’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $869,460 in FY2025, down from $4.9 million in FY2024
• Gross profit: Dropped to $8,290 from approximately $4.8 million
• Operating loss: Increased to $8.3 million from $3.4 million
• Net loss: Widened to $28.3 million from $4.9 million
• Loss per share: Reduced to $20.39 from $28.83

Outlook & Guidance

Looking ahead, Netcapital is expanding its Reg A offerings and exploring further integration of blockchain technologies. The company aims to scale its funding portal, which now charges a 1% fee payable in securities, as part of its strategy to create long-term value for shareholders. With a current market capitalization of just $11.97M and a price-to-book ratio of 0.34, the stock trades at relatively modest valuations. InvestingPro subscribers have access to 8 additional key insights about NCPL’s valuation and growth prospects, helping them make more informed investment decisions.

Executive Commentary

CEO Martin Kay emphasized the company’s mission to democratize access to private capital markets, stating, "We’re about democratizing access to capital in the private capital markets." He also highlighted the regulatory challenges, noting, "We spend a lot of time and energy and money, frankly, educating the regulators on what we do and why we do it."

Risks and Challenges

• Regulatory Uncertainty: Ongoing challenges in navigating fintech and crypto regulations could impact operations.
• Market Environment: The current macroeconomic climate poses risks to growth and profitability.
• Transition Strategy: The shift towards blockchain and digital assets involves execution risks and market acceptance.
• Secondary Market Liquidity: Creating liquidity for private investments remains a challenge.
• Competition: Intense competition in the fintech space could pressure Netcapital’s market positioning.

Netcapital’s strategic focus on innovation and technology may offer growth opportunities, but the company faces significant hurdles in achieving its long-term objectives.

Full transcript - Netcapital Inc (NCPL) Q4 2025:

Paul, Conference Call Operator: Good day, and welcome to the Metcalfer Inc. Earnings call. At this time, all participants have been placed on a listen only mode. The floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Corinne Krasier.

Ma’am, the floor is yours.

Corinne Krasier, CFO, Net Capital Inc.: Thank you, Paul. Good morning, everyone, and thank you for joining Net Capital’s full year fiscal twenty twenty five financial results conference call. I’m Corine Kraesler, CFO of Net Capital Inc. And I’ll begin by reviewing our financial results, and then our Chief Executive Officer, Martin Kay, will share his prepared remarks before we open the Q and A portion of our call. Before we begin, I’d like to remind everyone of the safe harbor disclosure regarding forward looking information.

Management’s discussion may include forward looking statements. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward looking statements. Any forward looking statements reflect management’s current views with respect to operations, results of operations, growth strategy, liquidity and future events. Met Capital assumes no obligation to publicly update or revise these forward looking statements for any reason or to update the reasons actual results could differ materially from those anticipated in these forward looking statements even if new information becomes available in the future. With that said, I’d like to now turn to our financial results for the full year fiscal twenty twenty five.

We reported revenues of 869,460 with cost of services of $40,003.44 or a gross profit of $8.29 $1.16 in fiscal year twenty twenty five. This compares to revenues of approximately 4,900,000.0 with cost of services of approximately 108,000 and gross profit of approximately 4,800,000.0 in fiscal year twenty twenty four. In line with our shift in business strategy in fiscal year twenty twenty five, we discontinue discontinued our consulting services to portfolio companies in exchange for equity, which accounted for the largest portion of our revenue decline year over year. However, our funding portal did charge a 1% fee payable in securities to every issuer that closed an offering. The dollar value of that fee amounted to $72,000.09 0 and 97,700 for the years ended 04/30/2025 and 2024, respectively.

In fiscal twenty twenty five, we evaluated our equity investments and multiple issuers for impairment in accordance with ASC three twenty one dash 10 dash 35 dash three. The fair value of several investments have declined below their carrying amounts, which were other than temporary. Qualitative indicators included the resignation of key personnel, discontinuation of business operations, termination of fundraising efforts, and other adverse development adverse development. As a result, we had we wrote off several investments resulting in an impairment expense of approximately 19,900,000.0. We reported an operating loss of approximately $8,300,000 for full year fiscal twenty twenty five as compared to an operating loss of approximately $3,400,000 for full year fiscal twenty twenty four.

The net loss for full full year fiscal twenty twenty five was approximately $28,300,000 as compared to approximately $4,900,000 for fiscal twenty twenty four. We reported a loss per share of $20.39 as compared to a loss per share of $28.83 for fiscal year twenty twenty four. I will now turn the call over to our CEO, Martin Kay.

Martin Kay, CEO, Net Capital Inc.: Thank you, Corine, and thank you to all our shareholders for being on this call today and for your continued support and interest in the company. As you heard from Corine, revenues did decline, but fiscal twenty twenty five marked a pivotal shift in our strategy as we transitioned away from equity based consulting revenue to focus on building a stronger, more scalable foundation for future growth. While this realignment brought some near term volatility and despite the challenges of macroeconomic headwinds and uncertainty in the financial markets, we remained on path to strengthen the core of our business and lay the foundation for long term growth. During fiscal twenty twenty five, our wholly owned subsidiary, Net Capital Securities, received its broker dealer license. As a result, we believe that we are positioned to serve a broader base of issuers and investors and have the ability to deepen our impact on democratizing access to private markets.

I think it’s also important to highlight platform success stories for our clients during the past year. For instance, our portfolio company, Zellgor, acquired Spellbook Studio, creators of the Infinite Black and the Infinite Black two. Magfast, a charging device company, raised more than $10,000,000 through multiple offerings on the Net Capital Funding platform, and this was the second largest total amount raised under Reg CF in the consumer packaged goods industry according to Kingscraft. We’re also pleased to share that Avadane, a graphene licensing technology company, raised more than $1,275,000 within the first twenty four hours pleased of launching its third offering on the Net Capital Funding Portal platform. So we’re proud of the tangible results our platform continues to deliver, which underscore the power of our ecosystem to help innovative companies scale.

We believe we continue to believe strongly in our mission to democratize access to private capital markets and remain committed committed to disciplined execution, product innovate innovation, and long term value creation. As always, thank you for your interest and support of Net Capital. And operator, we’re ready for questions.

Paul, Conference Call Operator: Thank you. At this time, we will be conducting a question and answer session. If you have any questions or comments, please press star one on your phone at this time. In the interest of time, we ask that participants limit themselves for

Martin Kay, CEO, Net Capital Inc.: questions.

Paul, Conference Call Operator: Today’s call. And there were no questions. Apologies. We just did get a question in. The first question today is coming from Jeremy Mink from Lakis.

Jeremy, your line is live. I was just wondering, could

Martin Kay, CEO, Net Capital Inc.: you shed light on your transition, you know, what what you’re

Jeremy Mink, Analyst, Lakis: looking forward to doing in

Martin Kay, CEO, Net Capital Inc.: the future? You have mentioned it in in in your

Jeremy Mink, Analyst, Lakis: on the call, so I was

Martin Kay, CEO, Net Capital Inc.: just wondering if you could shed light on that. You. Sure. I’ll I’ll take a stab at that, Jim. Thanks for the question.

And and if I’m not answering it, please, you know, follow follow back up. But, yeah, we talked about, you know, broadening the platform to do what we do, which is, you know, help companies raise raise capital to to build their businesses. We’ve been in the reg CF business. As as Corinne, I think, mentioned during fiscal twenty twenty five, we secured a broker dealer license for our subsidiary Net Capital Securities that take allows us to participate more fully in reg a capital raisings, which are typically larger. So that we hope will allow us to to broaden our access to, you know, capital raising fees associated with that.

We also have always believed in the integration of blockchain, digital assets, and crypto, you know, with traditional finance. But, obviously, the the regulatory environment has been somewhat in flux. Clearly, there’s it’s it’s still in flux, but there’s certainly some openings. And we have taken several steps to, you know, pursue that opportunity as well. So those, I think, are the the areas that we’re focused on.

And as Corey mentioned, you know, we’ve we’ve moved away from our equity based consulting business to focus more on those more scalable cash generating products and services.

Paul, Conference Call Operator: To to piggyback off that, I

Jeremy Mink, Analyst, Lakis: I just have two two follow ups, you know, sort of tie it together. So, like, your your those are

Paul, Conference Call Operator: the

Jeremy Mink, Analyst, Lakis: consultant business was your was first of all, was the consultant business the major cost of running the company? And that’s why you got such a such a high, you know, such a large loss this quarter as soon

: as this year. Excuse me.

Jeremy Mink, Analyst, Lakis: And then second question is, could you shed light on that crypto, you know, what you’re planning on doing with crypto? Is that, you know, profitable, please?

Martin Kay, CEO, Net Capital Inc.: Well, I can answer the the first question and then and then, you know, offer some guidance on the second. The first question around, you know, the the the financial dynamics of our business. The the funding portal itself, so leave aside the consulting or advisory practice, the funding portal is is technology. We’re a fintech company. And so typical in that in that sort of situation, there’s a fixed cost platform.

So if you looked at you know, we have approximately I think 20 employees is what we’ve disclosed. And if you look at if you look across our employee base, that’s where you’d see most of our employees working, and that’s a very scalable operation. So the key, obviously, to getting to profitability there and cash flow positive is is scaling continuing to scale the business. The consulting business or the advisory business, obviously, is not necessarily so much technology based. Obviously, we leverage technology there, but it’s not as scalable.

And, you know, we found that and and and and typically small companies struggle to pay cash for those services. So we’re we were in a business that was, you know, had scaled fine to the level that we were at, but wasn’t gonna obviously scale forever. We didn’t we weren’t really looking to build out a giant consulting company. And also where we were typically being paid in equity, which is hard to value versus cash. So so that’s kind of the way the current business looks, which I think is with the first part of your question.

Second part, with respect to, you know, to to blockchain and, you know, digital assets in general, you know, we we’re evaluating opportunities against the potential for, you know, long term value creation. You know, every day we see deals, I see deals getting done that, you know, trade down in the market, draw regulatory and exchange scrutiny, you know, and ultimately threaten the company’s liability in public listing. So we’re not and never have been focused on, you know, the the short term facts. We evaluate every opportunity that comes our way, and we’re out looking for opportunities. But but we’re not looking to jump on something that’s gonna be not not a good deal for the company or for our shareholders.

And you see some of that happening out in the market. The underlying trend with respect to crypto and the reason we put our advisory board together was to focus on the real integration of of blockchain into the capital formation process that we’re a part of. And we think I believe that’s a very exciting opportunity for us, which opens up access to capital, basically, both in primary and in secondary trading in ways and with user experiences that, you know, have have not been possible given the regulatory environment primarily over the last few years.

Paul, Conference Call Operator: Thank you. The next question is coming from Luis Navarreta.

Martin Kay, CEO, Net Capital Inc.: He’s a

Paul, Conference Call Operator: private investor. Luis, your line is live.

Luis Navarreta, Private Investor: Hello, morning. My question was similar to Jeremy’s question. So it was basically answered, but to be confident. So with the recent how do you say? I’m not from America, so bear with me a little.

Martin Kay, CEO, Net Capital Inc.: Yep. No problem. So

Luis Navarreta, Private Investor: a lot of recent performance, I was just thinking if you are evaluating different possibilities of adopting a new strategy with the recent current trends other companies are are adopting.

Martin Kay, CEO, Net Capital Inc.: Yeah. I’m not I’m not sure exactly what you’re referring to there, Louis, but but, you know, for sure, we you know, our our long term mission is is pretty clear and hasn’t really, you know, changed. We’re we’re we’re about democratizing access to capital in in the private capital markets. And so we’ll continue to explore every opportunity to do that in a way that is, you know, accretive to to shareholders. And so, you know, we’re we’re expanding across the reggae.

And and, again, as I mentioned, we’re looking for ways to, you know, to to to integrate blockchain digital assets and crypto with our more traditional fintech approach. Okay. Yeah. That’s what I wanted to to hear. Thank you.

You’re welcome.

Paul, Conference Call Operator: Thank you. And the next question is coming from Brandon Enver. And Brandon is a private investor. Brandon, your line is live.

Martin Kay, CEO, Net Capital Inc.: Hi. I just was

Jeremy Mink, Analyst, Lakis: thinking the the current business model seems to be unsustainable with no credible path to a turnaround. Is a a strategic pivot that seems to be urgently needed. Can you elaborate on that?

Martin Kay, CEO, Net Capital Inc.: Well, thanks for the question, Brandon. I think you made the statement, so I don’t know how I can elaborate on that necessarily. But, yeah, I can comment on what you said. We we do believe that our business our business, there is a path to, you know, to continue creating value and to for the business to be sustainable. That’s not to say we’re not always and haven’t always been looking at other opportunities.

But I’m not sure what you mean by a strategic pivot. I mean, I would I would argue that incorporating, you know, blockchain into what we do more more fully, and we’ve taken a few steps in that direction already and, obviously, are exploring others, you know, is the most obvious extension, I would say. I don’t think it’s a strategic pivot. I think it’s an extension. And no question, you know, our core business, you know, faces faces challenges.

I mean, it we we need to scale. And as Corrine mentioned, you know, the the environment has has not been wonderful for what we do, but but, you know, we we’re still very committed to that long term mission, and we’re committed to using whatever, you know, tools and technologies become available so that we can you know, our business is all about, you know, kinda threading the needle between the regulatory environment and the user experience. You know, we’re we’re trying to create and continue to create and evolve something that is a compelling user experience, but also, you know, works within the registry environment which we operate. And those those things are constantly changing. So, yes, we’re we’re constantly evolving.

I think we’ve made no secret that the you know, one of the most important things for us is liquidity in the secondary market, and that’s been a challenge for everyone in our space. And you see new new ideas, you know, for for providing liquidity in private capital markets. You see new ideas every day, and I I I don’t believe anybody has cracked that intersection of the user experience and and the registry environment, at least in The US. But, again, well, that’s those are things that we’re actively exploring, and we’re we’re we’re looking to, you know, to move forward on that on that front.

Paul, Conference Call Operator: K. Thank you. And the next question is coming from Emily McClellan. Emily is a private investor. Emily, your line is live.

Corinne Krasier, CFO, Net Capital Inc.: Hi, Martin. I have questions regarding your g and a legal or your g and a expenses. Why are they so high for such a small company? I mean, 5,300,000.0. I mean, 1,000,000 should be at legal at most.

200 k to IR and proxy is sufficient. I just that doesn’t look right on the books. Can you elaborate?

Martin Kay, CEO, Net Capital Inc.: Look. I mean, we’re a we’re a fintech company in the financial services space doing something that is very new and very different that I frankly, the regulators don’t understand very well. And this is we’ve always had a challenge with this. And so I I couldn’t agree more with you. Our legal expenses are much more than they should be, but that’s the cost of doing business at this point as a public company in the fintech space financial services.

You know, I I could let Corina, CFO, comment more specifically, but that’s the that’s the general and it is a frustration. We spend a lot of time and energy and money, frankly, educating the regulators on what we do and why we do it. And, you know, they’re just you know, there aren’t a lot of companies that look like us. Even, you know, let’s leave aside the Rexia and the and the Ray a, which is obviously all new in in the grand scheme of things. The you know, we’re we’re in our portfolio companies, we’re essentially operating as a public, you know, collection of of minority equity investments, which is, again, not something that the regulators typically have much experience in or understanding of.

So, yes, we spend more than we should, but it’s not more than we need to.

Corinne Krasier, CFO, Net Capital Inc.: Okay. I guess just to piggyback off that, I I I don’t think it takes someone too high in in the life to know that that’s just not sustainable. Would you guys you know, are you guys exploring going private? This is just it’s not sustainable for a public company with these numbers.

Martin Kay, CEO, Net Capital Inc.: No. And we we don’t, you know I I I don’t wanna I don’t wanna comment on that necessarily. We other than to say no, I mean, we you know, the company uplifted to Nasdaq. There are many benefits to being a public company, but it’s obviously no secret that there are also lots of costs irrespective of whether you’re a financial you know, you layer on top financial financial services and the regulatory environment there. It it just becomes very, very expensive.

But, you know, we we found and continue to believe that that the that the trade off is worth it, and some of the things that we’re exploring will will certainly benefit from the exposure of being a public company.

Paul, Conference Call Operator: Thank you. And that does conclude today’s q and a session. I will now hand the call back to Martin Kay for closing remarks.

Martin Kay, CEO, Net Capital Inc.: Hey. Thanks, Paul. Well, as always, you know, thank you for your interest and support of Net Capital. You know, it’s we we really appreciate that, and hope you all have a have a good day. Thank you.

Paul, Conference Call Operator: Thank you. This does conclude today’s conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.

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