Good morning, everybody, and welcome to the Netcapital Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for questions after the presentation. It is now my pleasure to turn the floor over to your host, Coreen Kraysler of Netcapital Inc.. Coreen, over to you.
Thank you so much. Good morning, everyone, and thank you for joining Netcapital's financial results conference call for our full fiscal year 2023, ended April 30th. This is Coreen Kraysler, CFO of Netcapital Inc. Joining me on the call are Martin Kay, CEO, and Jason Frishman, Founder. I will begin with a review of our financial results, and our CEO, Martin Kay, will follow with closing remarks before we open the call up for questions. 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. Netcapital 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. I'll begin now with a review of our financial results for fiscal 2023. Total revenues for the year were up 55% to $8.5 million, from $5.5 million in fiscal year 2022. We generated operating income of $2.3 million in fiscal 2023, versus an operating loss of $1 million last fiscal year. Equity securities at fair value totaled $23 million at April 30, 2023, versus $12.9 million at April 30, 2022.
Finally, we paid down approximately $1 million in debt in fiscal 2023. I'll now turn the call over to our CEO, Martin Kay.
Thank you, Coreen, thanks again for you folks for joining the call. Two things I wanted to cover. In January of this year, we announced an ATS, or Alternative Trading System, partnership with Templum Markets, and by offering secondary trading functionality, our goal there is to provide potential liquidity for investors by allowing users to trade shares. This is one of the great opportunities ahead for our platform, and coupled with our key competitive advantages, including lower costs for digital capital raising and ease of onboarding, our value proposition continues to expand. As we move forward this year, our primary purpose is, as it always has been, to continue to make private capital markets work for everyone. We believe the value proposition of our integrated offerings translates to value creation for both investors and entrepreneurs alike.
As we look ahead, our focus for the fiscal 2024 is on continued scaling of our portal business, focused on targeting three primary levers. The first is increasing the pipeline of high-quality scale issuers. We're building referral partnerships and targeting larger Reg A+ offerings, and we're also prioritizing industries where we see a lot of investor demand. For example, a recent review showed that clean tech and AI together accounted for almost 60% of capital raised across companies that were raising on the Netcapital platform. Increasing the pipeline of high-quality scale issuers is number one . Second is growing the investor community, the other side of our network, and transaction volume. In addition to fine-tuning our own marketing outreach, we're partnering with niche agencies and others to support issuers in driving investors to their offerings. That's the second thing.
Then third, as I mentioned, the anticipated launch of our secondary trading functionality. We expect this liquidity model to support the growth of both the investor and the issuer communities and to generate a potential new revenue stream for Netcapital. Exciting developments are underway, and we look forward to sharing more details through the year. As always, again, thank you for your interest and support of Netcapital. Operator, I think we're ready for questions.
Thank you very much. At this time, we'll be conducting our question and answer session. If you have any questions or comments, please press star one on your phone keypad now. We ask that while posing your question, you please pick up your handset if you're listening on a speakerphone to provide optimum sound quality. Please pause a moment while we poll for questions. Thank you. Your first question is coming from Mark Nelson of Tesche Incorporated. Mark, your line is live.
Hello, how are you doing today? Can you talk a little bit about the sectors of the business that are driving some of the profitability that we've seen lately? We know that you've been doing both consulting as well as the additional growth of the platform. Can you talk about how each of those lines of business are driving your current profitability?
Coreen, do you want to take that one?
Sure, absolutely. Thanks for your question, Mark. The key driver of profitability this year was our consulting business had a very strong year. We had several new clients, new portfolio companies that we launched, and as a result of that, that drove the strength in revenues this year. We're extremely excited about the secondary transfer platform functionality that we expect, that we announced that we expect to launch the beta test of by the end of calendar year this year, and expect that to drive significant momentum for the funding portal going forward.
A follow-up question for the consulting work, is that a long-term contract, or is that basically work from quarter to quarter?
Well, that's an interesting question that you have asked. The contracts themselves are short term, but we take significant equity stakes in most of the companies that we work with. We do work with them on an ongoing basis for the long term. Sort of a mix.
Great. Thank you. No further questions.
Thank you.
Thank you very much. Just as a reminder there, if you have any remaining questions, please press star one on your phone keypad now. Okay, we don't appear to have any further questions. I'll now. Oh, apologies. Somebody has just jumped into queue there. We have a question coming from Robert Topping of Topping Capital. Robert, your line is live.
Hi, Robert.
Thank you.
Hi there, everyone. Congratulations on the quarter.
Thank you.
I think a couple of my questions were answered, so that's good, on the revenue side and the platform. I guess the other couple of questions I had were, on the increase on equity securities fair value, I think from $12.8-$22.9. What's driving that, and how concentrated is it in terms of the increase in value? Is it, you know, one issuer that you have an equity exposure on, or just trying to get more insight to that? I have two other questions after that.
Yeah. It was a combination of, we did write up the value of two of our companies, so that increased the value by $1.9 million of that was from the write-up. The majority of that was driven by ChipBrain and part of that by MustWatch. That is because they did follow-on offerings at higher valuations, so we had to write up those values. Then the additional value increase was more portfolio companies that we added.
Got it. Yeah, I was speaking over you-
Yeah.
over you.
Yes.
When you write up, are you writing up to the latest round offering, or are you taking a discount off that? How do you approach it?
Yeah.
I understand.
The way it works, Robert, is that we have to look at the valuations with our auditor every quarter. And if there's an observable input as to what the price of those securities are, which is, you know, an offering, then we have to write up or down to whatever that value is, that the company last raised money at.
Yeah. Okay. Then, I'm not sure this might be for Martin or Cecilia or you, but someone on the team, it's just, I know there's been some talk about, at some point, kind of expanding categories or new categories. I noticed this baseball movie offering the other day, and I was just wondering if there was any additional insight into how you're thinking about that. I guess, Martin, to you now that you're a few quarters in, just curious with how you guys are thinking about that.
Yeah, that, that's an interesting one, Rob, the baseball movie. That's great. Look, I mean, we, as I mentioned in my comments, we've seen some concentrations in some sectors that you would expect. You know, Clean tech and AI, obviously popular across the economy and certainly the early stage community. We feel those, you know, we feel those same trends. But I don't think right now, other than, you know, supporting those things that are popular and, you know, trending right now, we're not making any deliberate moves into other spaces. We've had other media companies in the past on our platform. In fact, one of the companies Coreen just mentioned, MustWatch, is in the same space.
We're pretty agnostic with respect to industry sector at this point. Can I answer any questions?
Yeah, that's helpful. Thank you. The last question I was saving a sensitive one for the last, so sorry. It's really twofold. One, any status on the SBA loan. Secondly, you know, the constant selling of stock. I understand the need for working capital and all, but do you have any. It's come at every lower price. Do you have any kind of thoughts on the go forward on that? Are you kind of over the hump? I know there was a lot to do coming in, and I understand it, but I'm just trying to get a sense of how you're thinking that across the capital going forward.
Sure. Well, I'll take a stab at that one, then, Coreen, some comments on your SBA loan question. You know, we're laser focused on building long-term value, right? Built on the fundamentals, the three fundamental beliefs really that we've talked about. You know, we believe that in democratizing private markets, we're tackling a very real problem for investors and issuers, and it's a large potential market, number one. Number two, we're going after that with a differentiated solution, a business model that combines, as we've discussed, cash fees with a growing portfolio of equity positions. Third, you know, it's all about scale.
Our solution is highly scalable, and we're very focused on growing that issuer and investor community through, as we've discussed, a mix of organic activity and partnerships with others that can grow the community and extending our own value proposition through the secondary. All of those things, you know, we wanna do as quickly as possible. It's a big market. We have competitors. There's gonna be room for more than one, but we wanna be the winner in this space. You know, we wanna be well-funded and accelerate activity in those areas as fast as we can. That's what we're focused on, is building long-term value and, you know, accessing capital to support that effort.
Got it. Okay, thank you. Yeah, Coreen, any update on the SBA loan?
No, there's no update. We've filed our paperwork, and there's just no update.
Yep. I know how that goes. Okay. All right, well, congratulations to you all. Thank you for your time.
Thank you so much.
Thanks, Rob.
Thank you very much. Again, if anyone has any remaining questions, please press star one on your phone keypad now. Okay, we don't appear to have any further questions. I will now hand back over to the management team for any closing comments.
Thank you very much for joining, everyone. We're really pleased with the revenue growth that we generated this year. We're looking forward to offering liquidity to investors on the Netcapital platform through our secondary transfer functionalities that we hope to begin offering in beta by the end of this calendar year. Enjoy the rest of your summer. Thank you.
Thank you all.
Thank you, everybody. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.