Netcapital Q3 2024 Earnings Call Transcript

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March 19, 2024

There are 4 speakers on the call.

Operator

Good morning, everyone, and welcome to the Nett Capital Incorporated Quarterly Earnings Call. At this time, all participants have been placed on a listen only mode and we will open the floor for questions following the presentation. It is now my pleasure to turn the floor over to your host, Corine Kreisler of NET Capital. Corine, the floor is yours.

Speaker 1

Thank you so much, Jenny. Good morning, everyone, and thank you for joining NET Capital's fiscal Q3 2024 financial results conference call. This is Corinne Kreisler, CFO of NET Capital Inc. I will begin with a review of our financial results. Following that, NET Capital's CEO, Martin Kaye, will follow with his prepared remarks before we open the call up for questions.

Speaker 1

Before we begin, I'd like to call your attention to the customary Safe Harbor disclosure regarding forward looking information. Management's discussion may include forward looking statements. These statements relate to future events or to 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. NET 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.

Speaker 1

Turning to our financial results for the Q3. During the quarter, revenue decreased by approximately $1,200,000 or 54 percent to $1,000,000 as compared to $2,300,000 during the 3 months ended January 31, 2023. The decrease was primarily attributed to a decrease in revenue for consulting services that we provide in exchange for equity securities during the quarter. In the 3 months ended January 31, 2024, revenues from equity based contracts decreased by $1,100,000 or 56 percent to $862,000 as compared to revenues of 1,900,000 dollars in the 3 months ended January 31, 2023. A decrease of approximately $52,000 or 23 percent was also noted in funding portal revenues during the quarter when compared to the prior fiscal quarter.

Speaker 1

In Q3, we recorded $179,588 in funding portal revenues consisting of portal fees of $84,548 and listing fees of $95,040 as compared to funding portal revenue of $231,8.33 in the 3 months ended January 31, 2023, consisting of portal fees of $99,333 and listing fees of $132,500 The decrease in funding portal revenues for the 3rd quarter is primarily attributable to fewer issuers listing to raise capital on the funding portal platform. Funding portal revenues decreased approximately 23% to 179,588,588 compared to $231,041 in the Q3 of fiscal 2023. We reported diluted earnings per share of a loss of $0.19 in the 3 months ended January 31, 2024, which was down compared to diluted earnings per share of 0.33 dollars for the same period in the prior year. As of January 31, 2024, we had cash and cash equivalents of $2,172,099 I'll now turn the call over to our CEO, Martin Kaye.

Speaker 2

Thank you, Corinne. This was a challenging quarter for many businesses trying to raise capital in the current market environment. We had fewer issuers listing on our funding portal during the quarter than in the prior year period, but we remain optimistic about our future All companies need capital and Net Capital provides an easy to use, easy to access platform that connects high quality investors with high quality companies. We saw both overall revenue and funding portal revenue drop for the quarter, but we remain steadfast that we're providing the best service for our clients and that our value proposition continues to resonate with private companies looking for capital and with investors looking for opportunities. While our overall revenue for the 1st 9 months of fiscal 2024 dipped by approximately 14% compared to the prior year period, funding portal revenues increased by more than 70%.

Speaker 2

We had an increase in portal fees of 375,683 or 152 percent and an increase in listing fees of 48,040 The increase in funding portal revenues during the time is primarily attributable to increased offering activity on the platform that generated increased investments by investors who purchased securities on the portal. Another bright point during Q3 was that we closed continued growth in our funding portal revenues and believe it's a testament to the platform itself and the need for it. The platform continues to grow with over 100,000 people using it and with over 50 companies currently raising capital. Moving forward, we plan to continue to scale our platform and to continue catering to accredited and non accredited retail investors, early stage companies and others that need a platform designed to provide a real time solution that's user friendly and works 24 hours a day, 7 days a week. The scalability of our platform is a key driver of our business model, allowing us to grow revenues ahead of costs.

Speaker 2

As always, that capital will remain vigilant and dedicated to our shareholders, staff, customers and the investment community. And as always, we want to thank you for your interest and continued support of NET Capital. Operator, we are ready for

Operator

Thank you. Our first question is coming from Bill Peters of CAS III Investments. Bill, your line is live.

Speaker 3

Hi, good morning. Thank you for taking my call. Do you see the crowdfunding market consolidating? It seems so fractured. And if so, would management consider that and use their available NASDAQ listing as a potential partner?

Speaker 3

Thank you.

Speaker 2

Martin, do you

Speaker 1

want to handle that?

Speaker 2

Yes. Thanks for that question. Yes, very good question. We certainly agree that it's early relatively early in our industry and we're still relatively small as an industry. I think if you look at the data that's collected by 3rd parties, the equity crowdfunding industry is probably around $1,000,000,000 Reg CF and Reg A combined, flowing into private companies.

Speaker 2

And obviously, that's just a drop in the bucket compared to the overall amount of capital that's flowing into private companies. So, we believe that right now, it's very early in the industry. We're still growing and that there's certainly room for multiple competitors. That said, obviously, like any other company, we're always open to discussions and ways in which we can find opportunities to create value for our shareholders in partnership with others.

Speaker 3

Okay. Thank you.

Operator

Thank you very much. I'm not seeing any further questions come into queue. We have another question just popped up there. And it's from Bill Peters again from Cas3 Investments. Bill, your line is live.

Speaker 3

Hi. Thank you for taking my call again. I forgot to mention, where does the company stand with the ATS system, the alternative trading system?

Speaker 2

Again, great question, Bill. It's certainly been a focus for management over this quarter. We are currently in a closed beta is how I would describe that in a production environment. So we're working with our ATS partner, Templum. We have an invited set of beta users.

Speaker 2

What was previously in test environment is now in a production environment and we expect to be able to launch more broadly in the near future.

Speaker 3

Near future, 6 months from now, is that realistic?

Speaker 2

Yes, within certainly that's realistic. I would expect that to I would expect we would hope to be able to launch sooner than that.

Speaker 3

Okay. Thank you. Have a good day.

Speaker 2

Thanks, Bill.

Operator

Thank you very much. Well, again, we don't appear to have any further questions in the queue. I can hand back over to the management team for any closing comments.

Speaker 1

Thank you, Jenny, and thank you everyone for joining us, and we look forward to speaking to you soon.

Operator

Thank you very much, Karim. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for

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Key Takeaways

  • In Q3, NET Capital reported revenue down 54% to $1.0M and a loss per share of $0.19 compared to EPS of $0.33 in the prior year period.
  • Funding portal revenues dropped 23% to $179,588 as fewer issuers listed on the platform during the quarter.
  • During the first nine months of fiscal 2024, funding portal revenues rose over 70%, driven by a 152% increase in portal fees and higher listing fees.
  • The NET Capital platform now boasts over 100,000 users and has more than 50 companies actively raising capital.
  • The company’s alternative trading system (ATS) is in a closed beta with partner Templum and is expected to launch broadly within the next six months.
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Earnings Conference Call
Netcapital Q3 2024
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