NCPL Q4 2024 Earnings Analysis
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Key Highlights
- Revenue and earnings analysis for Q4 2024
- Key financial metrics and performance indicators
- Management guidance and outlook commentary
- Market position and competitive analysis
- AI-generated insights and analysis
Transcript
// Full episode scriptBETA FINCH PODCAST SCRIPT
Welcome to Beta Finch, your AI-powered earnings breakdown where we dive deep into the numbers that matter. I'm Alex.
And I'm Jordan. Today we're breaking down Netcapital's Q4 2024 earnings call - and wow, this one's got some serious ups and downs to unpack.
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.
Absolutely. So Alex, let's start with the headline numbers because they tell quite a story.
They really do. Netcapital saw revenues plummet 42% year-over-year to just under $5 million, down from about $8.5 million in 2023. But here's the kicker - they went from operating income of $2.3 million last year to an operating loss of $3.4 million this year.
That's a massive swing! What drove that decline?
The big culprit was their consulting services business. It dropped by $3.7 million - that's a 52% decline. They went from serving six companies in 2023 to just three in 2024. And get this - they aim to provide over $1 million in consulting services per client, so losing half their client base really hurt.
Ouch. But there's a silver lining here, right? I'm seeing some positive momentum in their core funding portal business.
Exactly! This is where it gets interesting. Their portal fees more than doubled - up 109% to $874,000. The average amount raised per offering jumped from $128,000 to $281,000, and they completed 53 successful offerings versus 50 the year before.
So they're doing more deals and bigger deals on average. That sounds like the platform is gaining traction despite the broader challenges.
Right, and CEO Martin Kay highlighted two standout deals: Avadain, a graphene tech company that raised $4.5 million, and EarthGrid, a plasma boring company that closed a $3.3 million round. Those two deals alone totaled almost $8 million.
Now, I have to ask about the elephant in the room - they took some serious hits on their investment portfolio, didn't they?
Oh yeah, this was painful to read. They recorded a $2.7 million unrealized loss on their equity securities, compared to a $1.9 million gain the previous year. The biggest hit was their KingsCrowd stake - 3.2 million shares that dropped from $1.00 per share to just 16 cents.
Yikes. And they also had some impairment losses, right?
About $1 million in impairments. They had to write off intangible assets from two acquisitions - MSG and a hockey-related website called "one-on-one fans." The people running both operations left the company, and without their expertise, management determined the assets were worthless.
That's rough. But let's talk about what caught my attention - their strategic initiatives. They're not just sitting still here.
This is where things get exciting. They launched a beta version of a secondary trading platform in partnership with Templum Markets. This is big because it gives investors who buy through their funding portal a potential exit strategy through secondary trading.
That addresses one of the biggest issues with private equity investments - liquidity. How does this platform work?
It's an Alternative Trading System, or ATS, approved in 53 U.S. states and territories. It can facilitate trading of unregistered securities, which is exactly what companies on their platform issue. So investors aren't completely locked in anymore.
And they're also applying for a broker-dealer license, right? What's the play there?
That's the other major strategic move. With a broker-dealer license, they can expand into Reg A+ and Reg D offerings. Under Reg A+, companies can raise up to $75 million every 12 months from both accredited and non-accredited investors, versus the current $5 million limit under Reg CF.
So they're essentially trying to move up market - from smaller crowdfunding deals to much larger raises.
Exactly. And under Reg D 506(c), there's no limit on how much companies can raise from accredited investors. It's a much bigger addressable market.
The Q&A was pretty brief, but did we get any insights on timing for these initiatives?
Martin Kay said they expect to open the secondary trading platform to a broader group of users before the end of this year. They're being cautious because, as he put it, "we're doing something that no one else has done."
Smart approach. Now, looking at the financial position - they ended with $863,000 in cash. That seems pretty tight given they're burning cash and investing in these new platforms.
Yeah, that's definitely something to watch. With an operating loss of $3.4 million and less than a million in cash, they'll likely need to raise capital or dramatically improve their profitability soon.
On the positive side, they now have over 100,000 users on their platform and over 50 companies currently fundraising. The 4.9% portal fee seems competitive, and the average deal size is growing.
Right, and they introduced that 1% equity fee this year, earning securities from 30 clients. That could be valuable long-term if these portfolio companies succeed.
So what's the takeaway for investors here? This feels like a company in transition.
I think that's exactly right. The consulting business that drove their historical profitability is clearly in decline, but their core funding portal is growing nicely. The question is whether they can scale the portal business fast enough to offset the consulting decline while also funding these strategic initiatives.
And whether the secondary trading platform and broker-dealer license actually materialize into meaningful revenue streams. Those are big bets that could transform the business if they work.
The other wildcard is their equity portfolio. They own stakes in 22 companies that used their platform. If even a few of those become successful, it could provide significant upside.
True, though the KingsCrowd experience shows that can work both ways. Before we wrap up, everything discussed today is AI-generated analysis for educational purposes. Past performance doesn't guarantee future results. Please do your own due diligence.
Absolutely. Netcapital is definitely a story to follow - they're trying to build the infrastructure for private market investing at a time when traditional IPO markets remain challenging. Whether they can execute on this vision while managing their cash burn will be the key question going forward.
That's a wrap for today's Beta Finch. Thanks for listening, and we'll catch you next time for more AI-powered earnings insights.
Until then, keep those portfolios diversified and those expectations realistic. See you soon!