Netcapital Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
September 15, 2023

There are 4 speakers on the call.

Operator

Good day, and welcome to the NET Capital First Quarter Earnings Conference Call. At this time, all participants have been placed on a listen only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Corinne Kreisler. The floor is yours.

Speaker 1

Thank you so much, Kelly. Good morning, everyone, and thank you for joining Net Capital's financial results conference call for our Q1 of fiscal year 2024 ended July 31, 2023. This is Corinne Kreisler, CFO of Net Capital Inc. I will begin with a review of our financial results and our CEO, Martin Kaye, will follow with his remarks before we open up the call for questions. Before we begin, I'd like to call your attention to the customary Safe Harbor disclosure regarding forward looking information.

Speaker 1

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. Turning to our financial results for the Q1.

Speaker 1

We are excited about the momentum shown by the Net Capital Funding Portal this quarter As funding portal revenues increased by more than 110 percent to 375,856 dollars in the 3 months ended July 31, 2023 compared to $178,500 in the 3 months ended July 31, 2022. This strength was driven by the success of several large issuers during the period. Total company revenues grew 13% year over year to $1,500,000 compared to revenue of $1,300,000 in the Q1 of fiscal year 2023. We reported a net loss of approximately $492,000 compared to net income of At least $65,000 in the Q1 of fiscal 2023 and the diluted loss per share was $0.07 compared to diluted earnings per share of $0.02 The 1st quarter net loss was driven primarily by non cash Stock based compensation for marketing and salary expenses that increased to $483,351 in the 3 months ended July 31, 2023, as compared to $32,953,000 in the 3 months ended July 31, 2022. I'll now turn the call over to our CEO, Martin Kaye.

Speaker 2

Thank you, Corine. As I stated in our fiscal year 2023 results conference call. I'd like to begin by reasserting our confidence in the differentiated value proposition of our integrated offering And in Net Capital's ability to drive value creation for investors and entrepreneurs alike. Right now, we have more than 100,000 users of our funding portal, which is a sizable pool of investors for companies seeking funding. There are currently 55 companies raising capital on our platform and both of these communities, investors and issuers, stand to benefit from our forthcoming launch secondary trading functionality, which has been a key focal point in the Q1.

Speaker 2

On the investor side, The purpose of secondary trading is, of course, to provide potential liquidity for investors from the ability of users to trade shares. Securities issued on the Net Capital platform are and have always been specifically designed to be tradable as straight common shares free of transfer restrictions. Unlike other funding portals, Net Capital doesn't allow issuers to sell Safe instruments, debt, revenue bonds, tokens or other hybrid securities. We believe this strategy of only offering common equity Coupled with secondary trading makes Net Capital Issuers more attractive to investors. From the issuer standpoint, those seeking to raise capital, net capital is differentiated and has always been by our lower cost solutions, Ease of automated onboarding and superior issuer experience as verified by issuers who've used both our platform and those of our competitors.

Speaker 2

On top of that, secondary trading should be a compelling added benefit for those issuers, providing another pathway for increased liquidity and potential for increased company value. The new liquidity feature is essentially complete, and we began internal testing last week. As a next We expect to launch a beta version of the secondary trading feature to a limited number of investors, and we hope for a full rollout by the end of December. So in summary, the endeavors I've discussed represent milestone achievements in technology and product And ultimately, a stronger competitive benefit for the audiences we serve. As always, thank you for your interest and support of NET Capital.

Speaker 2

And Greta, we are ready for questions.

Operator

Certainly. The floor is now open for questions. Your first question is coming from Michael Mattson with Singular Research. Please post your question. Your line is live.

Speaker 1

Hi, Michael. Good morning. Thanks for joining the call.

Speaker 3

Thank you and thanks for having me. Good quarter. A lot of interesting news. My question really looks at your revenue forecast going forward. Last year, you averaged 55% year over year growth.

Speaker 3

You had 4 straight quarters of sequential growth. This quarter you had around 13%, I believe year over year. Should we be looking at that as kind of the new normal, A growth rate that's kind of of that magnitude going forward?

Speaker 1

So Michael, great questions. Thank you very much Thanks for asking that. As you know, we don't provide a lot or any forward looking guidance. What I would say is that The summer months, which this quarter primarily represents, tend to be slower months for us. That's why we were Especially excited by the more than 110% growth we saw in the funding portal revenues.

Speaker 1

So I would focus on The growth that we saw in the funding portal to help you frame what you think about our revenues going forward, So that's really the cash engine of our company.

Speaker 3

Right. So speaking of kind of what's going on, on the portal, you're Very near to launching secondary trading. Congratulations on that. Thank you. Any forecast of when you'll be live and what that will mean for revenues?

Speaker 1

So what we have told investors and what we I said earlier in our comments is that we are currently testing the secondary trading feature internally, which is a really Exciting development for us. The next step for us will be to open up a beta version to a limited number of investors. And then we hope to have the secondary transfer feature live by the end of this calendar year. And we haven't talked about the impact on revenues yet.

Speaker 3

Well, good. Thank you for taking my questions.

Speaker 1

Thank you so much.

Operator

Your next question is from Mark Nelson with Toshi Capital. Please pose your question. Your line is live.

Speaker 3

Hello. Thank you for taking the call. For your launch in December, do you guys have a Sense of how many listings will be available on secondary market at that launch?

Speaker 1

Martin, do you want to jump in here?

Speaker 2

Yes, I can take that, Karim. Thanks so much for the question. We are as I mentioned in my comments, we have Specifically designed from the beginning our platform to so that all securities issued would be tradable In secondary, that's part of the agreement that issuers sign up for and have always signed up for. And I think we've disclosed elsewhere that we've had more than 200 companies, who have successfully raised on our platform. So ultimately, that's the goal.

Speaker 2

We will begin with A smaller number and working with our ATS partner, Templum, who is The alternative trading system platform that we're working with on the secondary, working with them, we will gradually Introduce those securities into the platform. So we haven't been specific about how many will be trading by when, But the point is, I guess, that all of them are ultimately eligible to be traded on the platform and obviously any more going forward. Great. Thank you very much. Does that answer your question, Mark?

Speaker 2

Thank you. Yes, it does.

Operator

There are no remaining questions in queue.

Speaker 1

Great. Thank you so much everyone for It looks like Michael Matheson might have a follow-up. Is that true?

Operator

Yes. Yes, he does. Just one moment. I'll place him in. Michael, your line is live.

Speaker 3

Thank you for permitting one more question. Just wanted to ask you about cash flow. You were in negative operating cash flow last

Speaker 1

Quarter.

Speaker 3

So, can we expect that for the coming quarters? And how would that be financed?

Speaker 1

Right. So what we have said about cash flow and financing is that we are Currently in a position of generating negative operating cash flow. And that given that, It would not be unreasonable to expect us to do future common financings from time to time. But one of the things again that we are very, very pleased to see is the growth, the very strong growth that we saw in the funding portal This quarter, and the increased activity we're seeing in the portal overall, both in terms of the average investment size and the success of the larger issuers that we're seeing on our platform.

Speaker 3

Okay, Good. I just wanted to confirm that expectation. Thank you.

Operator

Yes.

Speaker 1

There are

Operator

no further questions in queue.

Speaker 1

Thank you. Thank you so much everyone for joining us. We really appreciate your interest and support of our stock. We very much are looking forward to seeing investors at a few conferences coming up, specifically the LD Micro Conference and also the Think Equity Conference both in October. So we look forward to speaking with investors in person at these conferences and we'll talk to you on

Powered by Quartr
Earnings Conference Call
Netcapital Q1 2024
00:00 / 00:00