Netcapital Inc (NCPL) Q3 2025 Earnings Report

- Revenue: 152,682 USD for Q3 2025, down 85.0% YoY and -10.47% QoQ; gross profit 145,527 USD with a gross margin of 0.9531.
- Operating metrics: operating loss -1,687,692 USD; EBITDA -2,987,292 USD; net loss -3,006,537 USD; EPS -1.57.
- Profitability: net margin -19.69%, operating margin -11.05%; gross margin 95.31% (due to low cost of revenue relative to revenue).
- Cash and liquidity: cash at end of period 614,304 USD; net cash used by operating activities -1,163,543 USD; net change in cash -732,435 USD; free cash flow -1,163,543 USD.
- Balance sheet: total assets ~39.90 million USD; total liabilities ~4.93 million USD; stockholders’ equity ~34.97 million USD. Intangible assets 14.71 million USD; long-term investments 24.31 million USD. Current assets 672,819 USD; total current liabilities 4,430,412 USD; current ratio 0.152.
- Leverage and solvency: total debt 2.42 million USD; net debt 1.81 million USD; debt/equity ~0.069; debt to capitalization ~6.47%.
- Valuation metrics (from ratios): price-to-book ~0.113x; price-to-sales ~25.84x; enterprise value multiple ~-1.93x (negative EV due to cash position vs. debt).
- Coverage and efficiency: receivables turnover ~63.6x; cash flow per share -0.607; price/operating cash flows and price/FCF both negative due to negative cash flows.

- Strategy and execution: Martin Kay highlights the pivotal achievement of NSI becoming a broker-dealer, enabling private placements, Reg A/Reg D fundraising, and potential partnerships with other broker-dealers. He states NSI’s scope as a foundational revenue expansion vehicle: "NSI is now approved to do three things: First, handle private placements of securities as well as referral business. Second, support companies raising equity capital under Reg A and Reg D enabling larger fundraises and potentially attracting a broader range of issuers. And thirdly, partnering with other broker-dealers."
- Outlook and confidence: Kay emphasizes cautious optimism amid an uncertain market, noting early traction such as GenOn Neuroscience engaging NSI for potential Reg A activity: "Looking forward, we are pleased that GenOn Neuroscience, Inc. recently engaged Netcapital securities... to provide broker-dealer and administrative services". He reiterates continued updates on progress: "although the market environment remains uncertain, management remains cautiously optimistic and we look forward to keeping you updated on our progress."
- Operative performance vs. strategic shift: Coreen Kraysler notes the revenue decline is attributable to the absence of equity-services consulting revenue in Q3 2025 vs. Q3 2024, with a deliberate pivot away from equity-based revenue contracts as the broker-dealer subsidiary is established: "The decline in revenue was attributed to the lack of consulting service revenue for equity securities in Q3 2025, as compared to revenue of $862,346 for consulting services for equity securities in Q3 2024. In fiscal 2025, management has progressed on establishing our broker-dealer subsidiary... FINRA approval for Netcapital Securities, Inc."

Netcapital is at a crossroads. The Q3 2025 results underscore a material revenue gap and negative cash generation, but the company has unlocked a meaningful strategic lever in NSI, the FINRA-approved broker-dealer subsidiary. The near-term investment case hinges on NSI translating pipeline activity and regulatory-driven opportunities (private placements, Reg A/Reg D offerings, and broker-dealer collaborations) into meaningful revenue and, ideally, positive cash flow. The GenOn Neuroscience engagement signals market validation of NSI’s value proposition, but execution risk remains substantial given market uncertainty and the substantial impairment risk embedded in the current asset base. Quantitatively, revenue declined to 152,682 USD in Q3 2025 (YoY -85.0%, QoQ -10.5%), with a net loss of 3.01 million USD and a negative EBITDA of 2.99 million USD. The balance sheet shows a tight liquidity position (cash 0.61M USD; current ratio 0.152) and a substantial intangible asset footprint (≈ $14.7M) relative to current liabilities. Operational cash flow was negative (-1.16 million USD), and free cash flow was negative by the same magnitude, implying continued cash burn in the absence of meaningful NSI contributions. If NSI execution accelerates and revenue from Reg A/Reg D and private placements scales meaningfully, Netcapital could begin to leverage its broker-dealer platform to diversify revenue and improve cash generation. However, given the current liquidity constraints, negative earnings trajectory, and valuation metrics implying investor expectations for growth (price-to-sales ~25.8x) despite negative earnings, the stock remains high-risk with a need for visible top-line growth and cash-flow inflection before a constructive re-rating. Key monitorables include: (1) NSI revenue contribution by quarter, (2) progression of the GenOn Neuroscience engagement into funded deals, (3) any impairment reversals or additional impairments on intangibles, and (4) changes in liquidity management and working capital efficiency. Investors with a longer horizon and higher risk tolerance may value the optionality of NSI but should demand clear progression toward revenue diversification and cash-flow break-even before assigning premium multiples to NCPL.”} } ) } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } }}}