NCPL Q2 2025 Earnings Analysis

ALEX: Welcome to Beta Finch, your AI-powered earnings breakdown! I'm Alex.

JORDAN: And I'm Jordan. Today we're diving into Netcapital's Q2 2025 results - and wow, this was quite a quarter for the fintech platform.

ALEX: Before we jump in, I need to mention that this podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.

JORDAN: Right, let's get into it. Alex, the headline here is pretty stark - revenue plummeted 92% year-over-year. We're talking about a drop from $2.04 million in Q2 2024 down to just $170,528 this quarter.

ALEX: That's a massive decline, Jordan. But here's the thing - it's actually by design. The company deliberately walked away from what CEO Martin Kay called "noncash consulting service revenue." They had been taking equity stakes in companies instead of cash payments for consulting work.

JORDAN: Exactly. So they had $1.5 million in consulting revenue from equity securities last year, but zero this year. The company is essentially saying "we're done with that business model" and pivoting hard toward their new broker-dealer strategy.

ALEX: Speaking of which - the big news buried in these results is that they got FINRA approval for their broker-dealer subsidiary, Netcapital Securities. This is huge, Jordan. What does this actually mean for them?

JORDAN: This is where it gets interesting. As a registered broker-dealer, they can now host much larger fundraising rounds. We're talking Regulation A offerings up to $75 million versus the $5 million cap they had with Regulation CF crowdfunding. That's 15 times bigger deal potential.

ALEX: And instead of flat fees, they can now charge percentage-based fees on these much larger raises. Kay mentioned they've already had almost 300 companies successfully raise money on their platform, and many of those are candidates for these bigger rounds.

JORDAN: The math is compelling. If they can facilitate a $20 million Reg A raise and take even a 5% fee, that's $1 million in revenue from a single deal - versus their entire quarterly revenue of $170,000 right now.

ALEX: But here's what concerned me in the Q&A - when analyst Joichi Sakai asked about revenue visibility and specific forecasts, Kay basically said "that's not what we do." For a company that just posted a $2.2 million operating loss, investors probably want a bit more detail about the path back to profitability.

JORDAN: Good point. They went from a $52,000 operating profit last year to a $2.2 million loss this quarter. Their loss per share was $2.34 versus earnings of $2.52 last year. That's a pretty dramatic swing, even if it's strategic.

ALEX: And their cash position is concerning - just $1.3 million as of October 31st. At their current burn rate, that doesn't give them a lot of runway.

JORDAN: Though they do have that portfolio of equity investments worth over $25 million on their balance sheet from all those consulting deals. The question is how liquid those positions really are.

ALEX: There was another interesting tidbit about their secondary trading platform with Templum ATS. An investor asked about the launch timeline, and Kay got pretty evasive.

JORDAN: Right, he said the technical build is complete, but they're "still working through details of the regulatory framework." Last quarter they thought it would launch by end of 2024, but now Kay admits that timeline has pushed out with no clear target date.

ALEX: That's got to be frustrating for investors. Secondary trading would be a game-changer - allowing people to sell their crowdfunded investments before companies go public or get acquired. But regulatory hurdles are clearly more complex than they initially thought.

JORDAN: The Q&A session was pretty telling overall. We had some basic questions about share count - about 1.8 million shares outstanding - and warrant details that management couldn't answer off the top of their heads. Not exactly confidence-inspiring for a public company.

ALEX: So where does this leave investors, Jordan? On one hand, you have a company with over 115,000 investor accounts, strong digital marketing capabilities, and now a broker-dealer license that could unlock significant revenue opportunities.

JORDAN: But on the other hand, they're burning through cash, just posted their worst quarter ever from a profitability standpoint, and can't provide much visibility into when or how the broker-dealer business will start generating meaningful revenue.

ALEX: It feels like a classic pivot story. The old business model of taking equity for consulting wasn't scaling, so they're betting everything on becoming a regulated broker-dealer for larger deals. The market opportunity is definitely there - Regulation A fundraising has been growing rapidly.

JORDAN: The question is execution. Can they convert their existing relationships and platform into these bigger, more profitable deals? And can they do it before running out of cash?

ALEX: Their competitive advantage seems to be that ecosystem Kay mentioned - the investor base, the marketing capabilities, the technology platform. Traditional broker-dealers don't typically have that retail crowdfunding infrastructure.

JORDAN: True, but they're also competing with established players who have much deeper pockets and regulatory experience. The fintech space is littered with companies that had good ideas but couldn't execute the transition.

ALEX: For investors considering Netcapital, this is clearly a high-risk, high-reward situation. If they can successfully pivot to larger deals and leverage their broker-dealer status, the upside could be significant. But there are a lot of execution risks and cash constraints to consider.

JORDAN: Everything discussed today is AI-generated analysis for educational purposes. Past performance doesn't guarantee future results. Please do your own due diligence.

ALEX: The next few quarters will be crucial for Netcapital. We'll be watching to see if they can announce some significant Regulation A deals and demonstrate that this strategic pivot is working.

JORDAN: Until then, this is Jordan...

ALEX: And Alex, signing off from Beta Finch. Thanks for listening, and we'll see you next time for another AI-powered earnings breakdown!