NCPL Q4 2025 Earnings Analysis

ALEX: Welcome to Beta Finch, your AI-powered earnings breakdown where we dive into the numbers that matter. I'm Alex.

JORDAN: And I'm Jordan. Today we're unpacking Netcapital's Q4 2025 earnings call - and folks, this one's a doozy with some major strategic shifts happening at this fintech company.

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: So Alex, let's start with the elephant in the room - Netcapital's revenue absolutely cratered this year. We're talking about a drop from $4.9 million in fiscal 2024 down to just $869,000 in fiscal 2025. That's an 82% decline.

ALEX: Yeah, that's brutal on the surface, but here's the key context - this wasn't some operational failure. This was a deliberate strategic pivot. CEO Martin Kay explained they discontinued their equity-based consulting services, which had been their biggest revenue driver. They're essentially saying "we're getting out of a business model that wasn't scalable."

JORDAN: Right, and that makes sense when you think about it. They were getting paid in equity from small companies that couldn't afford cash payments. Hard to value, hard to scale. But the flip side is they took a massive impairment hit - nearly $20 million in write-downs on their equity investments.

ALEX: Ouch. CFO Coreen mentioned some pretty harsh qualitative indicators there - key personnel resigning, companies discontinuing operations, terminating fundraising efforts. When your portfolio companies are falling apart, that's going to hurt.

JORDAN: The net result? A net loss of $28.3 million compared to $4.9 million the year before. Loss per share went from $28.83 to $20.39 - which is actually better on a per-share basis, but still painful for shareholders.

ALEX: But here's what's interesting - they're not just cutting and running. They got something pretty significant during this transition: their subsidiary Netcapital Securities received a broker-dealer license. Martin Kay seemed genuinely excited about this.

JORDAN: And he should be! This opens up Regulation A offerings for them, which are typically much larger than the Regulation CF crowdfunding deals they've been focused on. We're talking about potentially bigger fees from bigger deals.

ALEX: They also highlighted some success stories. MAGFAST raised over $10 million - apparently the second largest Reg CF raise in consumer packaged goods. And Avadain raised $1.275 million in just 24 hours for their third offering.

JORDAN: Those are solid wins, but let's talk about the Q&A because investors had some pointed questions. Emily McClellan really went after their G&A expenses - $5.3 million for such a small company, with legal costs being particularly high.

ALEX: Martin's response was telling. He said they're a fintech company doing something "very new and very different that the regulators don't understand very well." He basically admitted they're spending tons on legal fees just to educate regulators about their business model.

JORDAN: That's the cost of being a pioneer, I suppose. But Emily followed up with what I thought was the most direct question of the call: "Are you exploring going private? This isn't sustainable for a public company with these numbers."

ALEX: And Martin firmly said no. He argued the benefits of being public outweigh the costs, especially for some of the opportunities they're exploring. Speaking of which, let's talk about their crypto and blockchain ambitions.

JORDAN: This was interesting - Martin mentioned they've "always believed in the integration of blockchain, digital assets and crypto with traditional finance." But he was very cautious about not jumping on short-term fads. He said they see deals getting done that "trade down in the market, draw regulatory scrutiny and ultimately threaten the company's viability."

ALEX: Smart approach, honestly. The crypto space is littered with companies that moved too fast. He talked about focusing on "real integration of blockchain into the capital formation process" - potentially opening up both primary and secondary trading opportunities.

JORDAN: The secondary market liquidity piece is huge. That's been a major challenge for the entire private capital space. If they can crack that nut using blockchain technology while staying compliant with regulations, that could be transformative.

ALEX: But let's be realistic about the current situation. Brandon Enzer, another investor, was pretty blunt: "The current business model seems unsustainable with no credible path to a turnaround."

JORDAN: Martin pushed back on that, saying they do see a path forward, but acknowledged the challenges. They need to scale their core platform business, and the macro environment hasn't been helping. He emphasized they're constantly evolving and trying to balance user experience with regulatory compliance.

ALEX: What strikes me is that this feels like a company in the middle of a major transformation. They're essentially betting that their broker-dealer license plus potential blockchain integration will create a more scalable, cash-generating business than their old equity consulting model.

JORDAN: The risk is execution and timing. They're burning cash - about $8.3 million in operating losses this year. They need their new strategy to start generating meaningful revenue before they run into liquidity issues.

ALEX: On the positive side, they're a pure play on democratizing private capital markets, which is a massive long-term opportunity. The Regulation CF and Regulation A markets are still relatively young and growing.

JORDAN: And their platform approach makes sense - they're not just facilitating one-off deals, they're building an ecosystem. With about 20 employees and a technology-focused platform, the operating leverage potential is real if they can scale deal volume.

ALEX: The question is whether investors will be patient enough for this transformation to play out. The legal expenses alone are eating up significant cash, and they're basically admitting regulatory uncertainty is a constant headwind.

JORDAN: Looking ahead, I think the key metrics to watch will be deal flow on their platform, the size and frequency of Regulation A offerings now that they have their broker-dealer license, and any concrete developments on the blockchain integration front.

ALEX: Absolutely. And keep an eye on their cash burn rate. They need to demonstrate a clear path to profitability or at least sustainable operations.

JORDAN: Before we wrap up, I want to remind our listeners that everything we've discussed today is AI-generated analysis for educational purposes. Past performance doesn't guarantee future results. Please do your own due diligence.

ALEX: Thanks for tuning in to Beta Finch. Netcapital is certainly a company to watch as they navigate this strategic transition. Whether they successfully evolve into a scalable fintech platform or struggle with execution remains to be seen.

JORDAN: We'll be keeping an eye on their progress. Until next time, keep those earnings calls coming, and we'll keep breaking them down for you.

ALEX: I'm Alex.

JORDAN: And I'm Jordan. Thanks for listening to Beta Finch!

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