Q2 2022 Forge Global Holdings, Inc Earnings Call
Ladies and gentlemen.
Good afternoon, and welcome to forges second quarter fiscal 2022 financial results conference call.
All participants will be in a listen only mode.
After today's presentation, there will be an opportunity to ask questions.
He would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one once again.
Please note that this event is being recorded and transcribed.
I would now like to turn the conference over to Dominic Michelle Senior Vice President at Forge. Please go ahead.
Yeah.
Thank you Abbe and thank you all for joining us today for good.
Second quarter 2022 earnings call.
Joining me today are Kelly Rodriguez.
Yes.
And Mark Li for this year.
They will share prepared remarks regarding the quarter's results and then take your questions.
Just after market close today, we issued a press release announcing important second quarter financial results.
This conference call is being webcast live and will be available for replay 30 day journey about one hour hour after the conclusion of the call.
There is also.
Accompanying investor presentation on our Investor Relations page.
During the course of this call we may make forward looking statements based on current expectations forecasts and projections as of today's date.
Any forward looking statements that we make are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those included in states.
We discuss these factors in our SEC filings included in our quarterly report form 10.
Thank you for this quarter.
We will file soon and can be found on the IR site.
As well.
As a reminder, we are not required to update forward looking statements in our presentation today unless otherwise noted we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meet.
When evaluating the company's performance.
For detailed disclosures on these measures and the GAAP reconciliations you should refer to the financial data.
Within our press release, which is also on the IR site.
Today's discussion will focus on the second quarter of 2022.
As always we encourage you to evaluate origin performance on an annual basis.
As well as accordingly, as well as quarterly results can be affected by unexpected events.
Outside of our.
With that I'll turn the call over to Kelly.
Thank you Tom.
Good afternoon, everyone and thank you for joining us.
We deliver our results to you this quarter against the continued backdrop of heightened market volatility.
Despite this turbulence.
We remain steadfast on building towards a long term vision.
With a commitment to build prudently while delivering on the strength of our balance sheet.
With that we'll share with you our second quarter 2022 results.
I'll briefly touch on the broader market context within which we're all operating before moving into our results and.
Business highlights.
As you're all aware.
Much like in the first quarter Q2 was characterized by the full quarter's impact of ongoing macroeconomic headwinds including inflation.
Rising interest rates.
And new workforce reductions across the corporate landscape.
And geopolitical anxiety with the ongoing war Ukraine.
Investors and companies continue to reset expectations and valuations.
IPO window remained almost completely closed and the public markets continued their volatility.
And yes and.
We've said this before.
<unk> market opportunity remains as clear in volatile times as it doesn't staples.
As the timeline to liquidity is pushed further and further out.
Private companies need for liquidity solutions.
The investor opportunity to access private companies at attractive prices become more pronounced.
We believe we are well positioned for market stabilization as.
As more new companies continue to arrive on the sports platform and as Investor an equity holder expectations trend towards equilibrium.
Some of the market insights we noted in our Q2 private market update released in late July showed that while companies in Q1, largely stayed off down rounds for primary financing in Q2, we began to see the inversion of primary fund raising volumes.
<unk>.
With companies in Q2 on average raising primary round at a discount to their previous rounds.
We also saw price compression in secondary trades. It took some time, but after consistently trading at a premium to accompany last primary round from Q1.
In Q2 for soft secondary trade prices declined to an average 6% discount to the last fundraising round as buyers and sellers continue to engage in real time price discovery.
On the secondary market the number of unique issuers with shares offered for sale on the <unk> platform was higher than in any other quarter.
As companies delayed ipos canceled stacks marked down 490, <unk> valuations and liquidity in the public market remain out of reach for many.
For example, <unk> valuation was reduced by key investors to $14 billion, a further reduction to the more than 38% haircut instant card self administered in March when it's valued itself 24 billion.
Last month, Swedish Fintech company, Clauda raise new financing at $6 7 billion.
Down 85% from the $46 billion valuation it secured just 14 months ago.
And just recently stripe.
Once the most highly valued private fintech companies cut its valuation by 28%.
Following suit.
On average secondary prices fell 22% when comparing the price of companies that traded on Orange markets in Q1 of 2022 and.
And subsequently this quarter Im sorry in Q2 of 2022.
That's a 22% secondary price reduction public tech indices made similar during the same period with acute <unk> following about 23% and the IPO ETF falling about 32% through the end of the second quarter.
And finally, Barron's recently reported over 300 companies are currently holding off on an IPO due to deteriorating market conditions and canceled specs.
Our everywhere.
However.
Even in volatile times, we continue to see new companies arrive into the <unk> platform.
The record number of unique companies that showed up.
To the platform in Q2 was accompanied by a slight narrowing of the spread between pricing that sellers are asking for their shares and the price at which buyers want to Bob.
The point at which average for sale prices and average buy prices converge.
<unk> referred to as price discovery equilibrium, we spoke about this previously.
In addition, the slight narrowing of the spreads and declining prices could be signs that sellers are resetting expectations as more private companies announce valuation reductions and investors continue to signal their seeking discounts to last year's prices.
Bid ask spreads peaked at 19% in April of 2022 and decreased slightly to 18% in June of 2022, but spreads remain wide compared to the historical median of about 11% that we tracked since January .
<unk> 2019.
We appreciate and listened to the analysts' feedback following our first public quarterly call and.
Introducing two additional business metrics. The first is the total number of companies with indications of interest are what are known as <unk>.
In Q2, they were up 26% year over year to 463 up from 368 in Q2 of last year.
We became a public company through our.
Marketing efforts media recognition of our thought leadership and brand awareness.
<unk> is now becoming synonymous with the private mark.
And the place people increasingly turn for insights expertise and liquidity solutions in the private market.
This means we are getting more private companies showing up to boards and this becomes latent economic power.
Unique companies with sell side <unk> also continued to build momentum and grow hitting.
Hitting an all time high up 75%.
Over a year ago quarter.
And as we've seen over the first half of the year businesses are trying to calibrate inventory demand.
Businesses as story and biggest Walmart have been saddled with inventory and buyers aren't buying as the supply and demand curve reset, but unlike those businesses holding inventory doesn't cost force any.
We're building the book.
Anticipation that price discovery equilibrium is reestablishing.
We are optimistic about the long term as more unicorns continue the mentioned.
And the levels of dry powder poised for deployment into innovative technology companies remains hot.
So now on to <unk> second quarter 2022 financial results.
In the second quarter of 2022 total revenues less transaction based expenses were about $16 5 million.
Compared to about $37 1 million in the year ago quarter, which I will note was an all time record in terms of revenue generation for forge.
In the second quarter of 2022 as said before there were more unique private companies with shares offered for sale on the <unk> platform than in any previous quarter and extremely encouraging to see relative to that inventory I just made.
Total custodial administration fees were flat year over year at $5 7 million and up 6% from Q1's $5 4 million.
Also listening to their feedback the second new business metric, we are giving this forges custodial cash balances.
Total $680 million up 10% year over year from $620 million.
Our supplemental investor information on R. R.
Our IR site as the historical data for both new business metrics, if youre interested.
Assets under custody increased 5% year over year to $15 3 billion in Q2 up from 14, 6% in the second quarter of 'twenty one.
And I'd like to highlight some notable business highlights for its made.
During the second quarter.
First of all work smart.
In Q2, our <unk> markets and custody business segments delivered impressive updates and functionality and experience.
New updates for the fourth platform include predictive analytics that use machine learning to recommend the most likely buyer and seller of certain stocks.
Dashboard features that enable faster more efficient trading, including <unk> management capabilities that reduce the time it takes to close trades.
For its trust released a new client portal for self directed IRA account holders.
Which gives our clients access to key documents and enables them to more seamlessly execute self directed transactions as well as improved support for their advisers and representatives.
Now on the data side.
In our forged data business, we announced upgrades to forge intelligence designed to enhance the experience for our customers and provide even more visibility into the private market.
Additional enhancements include front and center data on the biggest price movers on the force platform.
Visual summaries of trade activity now alert data customers to changes in pricing since they last logged in the forwards intelligence and instantly summarized companies with the most prolific trading activity.
Additional enhancements also include two new integrated datasets accessible to forwards intelligence customers.
Membership interest transfers and enhanced public marks data, providing users with an expanded breadth of data points to enhanced pricing and valuation analysis.
In addition to enhance the support intelligence, we extended volume weighted average price of private stocks known as <unk>.
Beyond the data platform to forge markets clients.
Extending the Wap to our markets clients is one more way we are increasing the visibility participants have so they can confidently participate in the private market.
We also continue to make traction and create numerous new relationships through partnerships and alliances with multiple top tier banks in the quarter, including signing an agreement with Morgan Stanley under.
Under which Morgan Stanley May direct their customers orders equity securities of private issuers to forge markets platform.
On fire it.
We hired Jonathan short as our new Chief legal officer.
Jonathan experience and leadership building and running an impressive legal and regulatory organization for the Intercontinental exchange or ice parent company of NYSE, one of the world's most respected financial services company.
And his expertise in corporate governance, M&A regulatory and government affairs is invaluable to floors as we focus on our next stage of growth to enable an accessible liquid and transparent private market.
Jonathan spent 14 years as general counsel advice and was part of the team that built this juggernaut to a $45 billion public financial services company with both domestic and international operations the.
The legal function from a two person team when he joined to a team of <unk> 75, legal and regulatory personnel.
Very excited to have John Jonathan onboard.
I'm also pleased to announce we promoted Jose cobos precedent in the quarter.
As they had been an integral and strategic leader for the business as we transition from private to public.
Now as responsible stewards of capital we.
We are taking a judicious approach to hiring.
Including growing our engineering team to accelerate technology development, we ended the quarter with 350 team members.
Reflecting on the environment we.
We have slowed the pace of hiring.
And we will continue to be deliberate in adding head count.
However, the opportunity remains clear.
Turning to asset classes are growing as clients continue to rebalance their overall portfolio.
And as their advisors and <unk> continued to allocate towards <unk> in general.
AUM for alternative assets is expected to approach 13 trillion by 2025 and as a result.
<unk> market trading for total addressable market is expected to hit 8 billion by 2026.
Very simply we want to be prepared to own the market.
So in this period of heightened market disruption and turbulence, we're still focused on building.
Both for now and for the future.
With the goal of improving our trading platform to drive down the cost and time of trade building the products that will continue to broaden access to this market like lending and.
In taxable custody.
Growing our strategic partnerships and expanding our presence internationally and improving the way, we deliver data and insights so all who interact with forge get more value out of those engagements to be clear.
We're also mindful of the critical need to build prudent.
And so we are scrutinizing the ROI potential of every dollar we invest to prioritize the long term profitable growth of the <unk> platform.
We are helping investors companies and private shareholders navigate this unprecedented market with our data. Thanks.
Our expertise in programs and believe with continued enhancements to our offering and with the value, we're bringing to customers and potential customers. During this disruptive time, we are well positioned to capitalize when the markets stabilize.
Now I'll turn it over to Mark <unk> our CFO .
Thanks Kelly.
In the second quarter of 2022, or just total revenue less transaction based expenses.
$15 5 million down from $37 1 million in the year ago quarter.
Of that amount.
Total placement fee revenues reached $11 million down from the second quarter of 2021, where total placement fee revenues came in at $33 million.
As Kelly previously noted last year was an extraordinary year for the overall market due to record public market <unk> and significant flows VC investments into private companies.
With forge achieving record quarterly revenues and high watermarks or year over year comparisons.
That's actually volume in this quarter was $332 million at.
64% decrease from the quarter ended June 32021.
Ongoing result of macroeconomic and geopolitical instability and continues to create dislocation.
The average net take rate for the quarter.
It was down 6% year over year at three 2%.
And as we previously described fluctuations and take rates are generally attributable to changes in the mix of individual versus institutional block trades.
Tunnel custodial and administration fees were flat year over year at $5 7 million.
Total custody accounts decreased 7% year over year to $1 7 million in the second quarter of 'twenty two from $1 9 million in the second quarter of 2021.
This decrease was driven by a one time the activation of billable inactive accounts from one of our cast clients.
Actual impact was negligible and this does not affect custodial cash balances.
Account growth to continue and perform stress to benefit from continued interest rate increases.
Second quarter GAAP net loss was $5 1 million compared to GAAP net loss of $8 million in the second quarter of 2021.
Adjusted EBITDA is another measure of our operating results.
In the second quarter adjusted EBITDA loss was $12 3 million.
Compared to adjusted EBITDA gain of $6 five in the year ago quarter.
We have included the reconciliation of adjusted EBITDA to the most recently comparable GAAP measure both in the press release and in our SEC filings.
Cash flow from operations.
Net cash used in operating activities was $18 2 million in the quarter.
Compared to net cash provided by operating activities of $19 2 million in Q2 of 2021.
The year over year changes for both adjusted EBITDA and cash flow from operations are primarily driven by lower revenues and they also reflect our continuing investment in technology and growth initiatives.
We also are investing in finance legal and risk infrastructure that will support our future growth.
Kelly said, we're mindful of the evolving macroeconomic environment and we continue to strike a balance.
Claim positioning for growth as well as being a prudent stewards of investors capital.
Cash flow from financing activities.
Net cash provided by financing activities was $22 6 million in the three months ended June 32022.
Compared to net cash provided by financing activities of $32 7 million in the three months ended June 32021.
Our cash balances from financing activities increased in connection with the redemption of our public warrants.
Of the approximate $18 5 million public warrants previously outstanding.
Approximately $2 million or exercise.
And cash proceeds generated from these warrant exercises approx.
Approximately $23 million we.
We were able to simplify the cap table and reduce shareholder dilution.
The cash and cash equivalents on the balance sheet ended the quarter at approximately $205 million.
From a housekeeping perspective, our weighted average basic number of shares used to compute net loss was 167 million shares.
And our fully diluted outstanding share count as of June 32022 was 189 million shares.
Within our supplemental investor information on our IR site.
We've also provided an estimate for Q3 and Q4.
Our average basic common shares outstanding.
And our non non cash stock expense.
For modeling purposes.
We outlined during our first quarter conference call.
Given the continuing volatility and uncertain market conditions <unk> is not in position to provide guidance at this point in time.
We will continue to monitor and evaluate to determine whether to change our forward guidance practice in the future.
It is important to note Argos has August has historically been a seasonally slow months.
And we.
There are tough comps from our all time record first half than we saw in 2021.
As markets stabilize.
We expect our growth to resume to normalized levels relative to the huge opportunity in front of us.
While managing through this environment of uncertainty and high market volatility.
We're actively managing our costs and investments be good stewards of capital, while maintaining our focus on growth and building. The company, we continue to invest in technology and sales and marketing to support our growth.
As we scale and our investments bear fruit, we expect our cost to accelerate as a percentage of revenue. We ended the quarter with 350 in total head count up 36% year over year.
Our most important asset is our people and we will continue to invest in and expand our employee base and an appropriate, albeit slower pace. This is a very important consideration that the management and board.
Can you re evaluate in real time.
So let me and the call back to Tony Thank you Mark.
In closing I want to thank our shareholders.
For their confidence and forge.
And our vision for building the private market's future.
The second quarter has been a challenging economic environment for all companies.
It is especially challenging.
<unk> for the companies who shares are traded.
In the private market.
In private markets. It takes time for company valuations to recalibrate when there has been broad based market turbulence like we're experiencing today.
The evaluations will recalibrate that as a fundamental tenet of how markets work.
When they do we believe we're well positioned.
In the meantime through our data our expertise.
Our market insights were helping the participants in the private market navigate this moment.
And we will continue to build prudent so that we don't Miss the opportunity that we have in this moment.
Convert that latent economic power into closed trades.
To cement our leadership position.
To advance our powerful trading engine.
Liver greater value for our customers.
And our shareholders.
Now I'll turn it back to you.
We are a welcome.
We are open to taking questions from the audience.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.
We will take our first question from Devin Ryan with JMP Securities. Your line is open.
Hey, Thanks, good afternoon, everyone and good afternoon, everyone. Thanks for taking the question.
Thank you Devin.
I guess really where I want to start here is kind of this conversation around markets moving into equilibrium and I. Appreciate all the detail you guys provided.
I also appreciate July and August probably arent going to be necessarily great months to judge engagement, but can.
Can you, maybe just talk a little bit about the monthly progression.
Of what you guys have been seeing.
Over the course of the second quarter into the early days of the third quarter.
And assuming that we are kind of moving closer to equilibrium as you talked about.
Assuming we will see an improvement in the number of trades and so hopefully reacceleration there thats meaningful and then also how should we think about kind of the volume per trade to the extent, where maybe a lower price environment.
Let me let me start this is Kelly, let me let me start.
With the first part.
As you can imagine are watching the data carefully.
And clearly from our last call we continue to see a market that's driven by.
More sellers than buyers.
And while we're watching the bid ask spread.
So important to understand that these are averages.
We are careful.
Did not.
Overstate, what we think could be indications that the market's turning however, given some of the facts that we've cited.
Including valuations being accepted now by companies and even proactively being moved by companies.
Some of the trade activity that we see relative to what the bid ask spreads were in the previous period.
We're hopeful that equilibrium is coming.
I'd say as Mark pointed out.
This is historically been a seasonal time of year when institutions.
Sometimes our off whether it's vacations or what have you, but we do believe and have said in the past been in periods of volatility as we saw during the pandemic. The first movers were institutions coming back in to buy at attractive pricing. So we're watching that carefully we are not seeing mean.
<unk> full changes in our fees, if youre asking that around the lower price environment, but we definitely are seeing trades getting done now at prices.
At work getting done in Q1.
And so.
Say, we're going to continue to watch it.
The last time, we saw anything disruptive like this in 2020 it was about two quarters.
But theres a lot going on in the world right now, but we don't control so I'd ask mark.
To jump in if I'm not hitting any of the other points that indicate what we're seeing as sort of a forward look.
Hey, Devin.
Couple of things I guess that was mentioned.
One of the things is that.
We typically do.
Don't see significant movement and don't expect to see movement in the average size.
But trade.
As typically institutions that R&R platform looking to take a position in a particular name or are usually looking to take a certain bite size that has a meaningful impact right to their portfolio.
So if theres a price decrease in a particular spot.
More often what youll see is that will be acquiring more shares.
At a lower price in order to take the position.
Yeah.
And that is meaningful to the size of that portfolio.
Other thing that I would I would note is that.
No I don't and we're all watching this.
At the at the macroeconomic level I mean watching the public markets and looking at the volatility.
And looking for the moments when you felt that the public markets are starting to normalize or stabilize I think.
That's an important and a faster than we're keeping an eye on because it will and we will encourage the buyers to jump back in the market same with kind of.
The views on the fed the response that the fed will start to slow.
Pace of increase of interest rates and then finally.
With regard to your comments about July and August is important to note that.
That as we kind of start to see improvement in our engagement and our matching of trades with our clients. There is a time lag in the private markets for the time that it takes to close and settle trades, it's not the kind of same process the T plus <unk>.
T plus plus plus two plus three kind of in public markets and so that's another thing that obviously has to be taken into consideration.
Okay great.
Great color guys. Thanks, so much and just as a follow up here, maybe just hit on expenses obviously appreciate.
We don't have guidance, but maybe a little bit more context around how you're thinking about.
Spending and whether that's evolved at all just given the shifting market backdrop, and whether maybe you're re prioritizing into certain areas are pulling back in certain areas you still see that youre hiring and obviously, it's such a big addressable market and the secular opportunity, but in the near term.
The thinking shifted at all around where to spend or how much to spend.
Yeah, Let me Devan.
Let me handle that question first.
This is mark again so.
As a reminder, I think we've mentioned this kind of an analyst day.
Although thats that sometime past now.
But just as a backdrop.
One thing that section.
The second half of 2019.
<unk> has been a positive.
Adjusted EBITDA company since 2017.
And so.
Our operating philosophy has always been and remains and run the company with positive to breakeven adjusted EBITDA.
With breakeven to slightly negative.
Operating cash flow.
And in fact, we entered 2022 no different right we were targeting in 2022 to achieve.
Positive slightly positive adjusted EBITDA.
So while the current macroeconomic environment has significantly affected our top and bottom line for 2022.
We continue to believe that the right approach is to moderate our spend.
Let's stay focused on building the business for the long term benefit of our shareholders and so.
And kind of directly answering your question.
And as you pointed out I mean, the opportunity and the Tam for this business has not changed if anything I think our clients need our support and services even more so in this time.
Turbulence in cell.
We think that.
At this phase in the evolution of forage now is not the time to pull back.
Significantly we have to be prudent so we're moderating the pace of our hiring we're very cognizant of that we're watching it closely but we need to continue to build out the infrastructure for the future.
Being the leader in this space.
And so thats our goal as Kelly said.
A lot of our growth that we've been focused on is continuing to build technology, our marketing and go to market efforts and a loss of making sure that we're providing the financing legal and risk that we need to support our future growth.
No.
Yes, I guess I guess I wouldn't add much to.
The fact that we did.
Slow we made a deliberate move to slow hiring.
At this point in 2022, and we're going to watch the rest of this quarter.
Before we make any decisions on the acceleration of that of those staffing plans and then the one other thing I might add is with the cash in our.
Our balance sheet.
I think we feel like we're in a significantly stronger position than many of our direct competitors and in fact now is the best time.
Kevin and capitalize on that gap and that difference that competitive advantage. We have we have the wherewithal I think Tim and we believe that we have the wherewithal that kind of got through this period and to stay focused on growing the company.
Yes.
Okay well.
Roy wholesome answers and I appreciate the time, Thanks, Kelly Mark.
Thank you Devin.
Abby where in the next call.
Yes, we will take our next question from Ken Worthington with J P. Morgan Your line is open.
Hey, Good afternoon, guys. This is Michael Cho.
Thanks for taking my question.
Mark I guess I just wanted to touch on the last point.
You highlighted around this around the balance sheet.
Realize that appeared moderating spending slowing hiring but again as you mentioned.
So very solid balance sheet. During this kind of compressed period. So I'm just curious if there.
Ways, you're considering as you mentioned to take advantage of the situation.
Whether organic or inorganic.
Just given your balance sheet today.
Yeah, I'll start and Kelly can can chime in Michael I appreciate the question.
Yeah.
Look I think that.
Since we spoke with with everyone kind of went through analyst day dinner first quarter presentation, we outlined kind of a number of key initiatives and really in the quarter, saying that hasnt changed materially building out our core business containment to improve our technology and increase the efficiency of our training.
<unk> built.
Building, our data business, which we're really we continue to be really excited about in terms of the opportunity and we think the reception that we're getting from the market.
We talked about lending and a new product that we're working on and that we expect to kind of rollout in the future and then and then Kelly you also mentioned international expansion all of these things.
Are things being talked about.
And these are the things that we're focusing on building.
They're being that kind of.
<unk> will help us to be successful. So so so that's what we're bundling.
Through our our technology and our go to market and marketing hiring.
And we'll continue to do so yes, I would add on the M&A side.
Part of the reason we went public was because we felt there was an opportunity to continue our organic growth Caswell looking selectively at M&A targets, we think the market.
We will create some opportunities for us we're going to be.
Really careful.
But but we think that there are opportunities that will advance for us to look at in the market as periods of build liquidity not only helps our core business problem that we're solving but provides us with opportunities to scale inorganically as well. So I think we have to be really careful and mindful of our balance sheet, but as mark pointed out. This is the time.
Relative strength for us that making a move its inorganic could be in our best interest if it's the right kind of deal price at the right at the right points, but again.
A lot of sellers out there whether they're on our platform or not are being careful and are watching valuations carefully and so a week. So we're going to keep our heads down we're going to continue to build we've got a great team of people here and I think if anybody on this call.
Looks at the opportunity and scale of the private markets Youre going to want a team that's committed poised and capitalize to go out and execute on that even if the short term looks a little tougher. So we're we're ready and very excited about continuing to keep our heads down and execute.
And Michael and the last point I want to reiterate Kelly mentioned this but we announced the agreement that we signed with Morgan Stanley .
With with our roster of partners, including Morgan Stanley and Wells Fargo, and BNP and others.
We're working with our others that cannot be named.
That's another important part of building out the <unk>.
Large brand.
And and platform out to out to the market. So I just wanted to kind of stress that point, that's another important element of our strategy.
Great Great. Thank you for the excellent.
A follow up just wanted to make sure that cost is frankly, Kelly you mentioned can you talk to this a little bit, but when you talked about spreads being kind of 19% at the start of the quarter and heading to <unk> did I hear that correctly, where you should assume to be some transaction volume.
As the quarter progressed.
Really just trying to get a characterization of how you characterize activity or pipeline exiting Q1 versus exiting Q2. Thanks.
Yes, So look I guess I guess the point there to be really clear is that the difference between <unk> 19, and 18 doesn't really indicate a meaningful shifts in volume so much is.
A little signs of life.
Potentially be viewed as a indicator of what's to come but in terms of volume I think the number that I also cited was that if you look back over a couple of years a broader datasets you see bid ask spreads around 11 <unk>.
Really were present during the period of <unk>.
Incredible volume we saw in 2022, so we got a little ways to go but we're all sitting here like everybody else optimistic about that.
Equilibrium moving closer towards that point, where we start to see trades happen. So I wouldn't I wouldn't go out as far as to say that <unk> has.
<unk> is a meaningfully better better number of things.
Hey, Michael too and to reemphasize some of the points there.
That were mentioned earlier.
Fact that we're starting to see our trade at valuations that are below the last round as an important indication that the private market shareholders are starting to acknowledge.
And recognize that.
The decrease in and their valuations and the multiples that they had previously been trading at and examples of R&R right and hence the card and.
Strike.
No.
I think what we were.
We'll continue to see private companies start to start to.
Realized and you'll start to see as they continue to raise money from the venture World yourself and you'll start to see those reduce valuations recognized in both primary and secondary market and I think I think we're encouraged by.
By that trend.
Mark a question on email.
If valuations decline in the take rate is constant does that mean your revenue.
Associated with the decline in valuation.
Okay, and what's the dynamic there.
Yes.
And I think that was the question that was asked.
By Devon.
So the question is I guess with lower valuation for that imply a lower trade sizes and lower trade size imply lower revenues right and I think historically.
We have not seen that historically, we've seen people want to trade at a certain size.
In order to have you.
Wanted to put $100000 to work or half a million dollars worth in a private company and a private company sponsored down 30%.
Shirley can reduce your trade down to the 300 <unk> still want to buy just don't want to take a meaningful bite size position in that stock. So youll still by 500000 spot.
Get more shares.
Due to the lower priced so that has historically been kind of the pattern that we've seen so we don't expect.
<unk> direct.
Relationship between decreased valuations in smaller trade sizes. The other thing I would remind people is.
Again, when you kind of go back to the Tam when you think about the total addressable market the valuation of private companies the relatively low base of trading activity that forge and our competitors. Currently trade right. This is a stat that was in our prior analyst day position our presentation.
But even for us as the leader in this space and total volume in 2020, one that we traded in those private companies that were on our platform was only 2% turnover so the opportunity.
And even if there was some minor diminishment of the valuation there are just so many more companies to trade so much more opportunity to give shareholders liquidity.
Then kind of where we are today. So that again this gets back to the massive Tam and the opportunity in the early stage that we're at.
In this opportunity.
Yeah.
Sorry, Michael.
We finished Michael Michael to answer all your questions, Yes, I'm all set thank you.
Awesome. Thank you Abby I think we're ready for our last question alone.
Yes. Thank you.
Excuse me and as a reminder, if you would like to ask a question. It is star one and we will take our next question from Owen Lau with Oppenheimer. Your line is open.
Thank you for taking my questions.
So I saw that your total custodial accounts declined sequentially from $2 2 million to $1 7 million, but your assets under custody actually increased from $14 9 billion to $15 $3 billion could.
Could you please explain a little bit more on these dynamics why accounts went down but assets went up thanks.
Yeah. This is mark let me answer that question so.
As we said as I said earlier the decrease.
And it has.
You're exactly right the quarter over quarter change.
It was more significant than the year over year change, but this was onetime deactivation.
Accounts and these were billable accounts. These were accounts that we were charging fees on.
These were inactive accounts or our client and said this is our custody as a service business, where we provide custody to other financial institutions and we have a task client.
<unk>.
Have inactive accounts that.
And therefore, when they were to deactivate. These accounts. It had did not have an impact on the app and the amount of assets under custody.
These are inactive accounts.
Okay.
Got it so my follow up it's about the indications of interest.
And I try to understand how to leverage these inflammation.
You mentioned that the total number of company were $1 63 up 26% year over year.
I understand that we need to think about demand as well to supply demand imbalance, but historically speaking.
<unk>.
When do you see a nice increase in.
The indication of interest.
Does it take them to start issuing and trading shares. Thanks.
Once you launch it.
So I think the the thing we're excited about.
Is is the.
The increase.
Understanding and awareness of forge.
As as we become a public company as we contained to invest in marketing to help people understand margins there to kind of meet needs in the private markets and I think what we're saying is as a result, we're seeing an expansion of the amount.
Private companies that have shares available for trading on our platform and then obviously as you.
As you've heard us described.
Price discovery will there be on there is that there is other elements there.
And then kind of have to drive our has to happen.
For those.
<unk> can translate into.
Closed trades and remedies.
Say that we've spoken about the spread the bid ask spread and that's an important variable.
That has two.
Obviously the prices have to meet.
So so so you can have a bigger limit order book, but if fee.
Spread between bid and offer remains elevated.
That's going to be a challenge.
Those trains close.
And then as we've said.
We're seeing record levels of.
Sell side.
Activity and representation in our book.
Book.
And so we're very encouraged about that but that's what we're describing is this late in the economic power because once the buyers.
Regained the confidence to engage once between the day they move from a risk off position and they are willing to kind of come back in with their dry powder. Right. Then the inventory is there to meet them meet that demand and then at that point that will start to see kind of the.
On the recovery.
I guess, the only thing I'd add here is that <unk>.
Sometimes when we're presenting the data.
Its presented and averages.
So what's lost in that is depending on the name.
<unk>.
The time between when an IOR.
It comes on to afford in a trade can happen.
Going to rely on interest in that name in the mindset of the sellers, particularly in this particular environment, where you Havent, where just recently seeing signal in the market.
Around companies lowering the valuation expectation. This is still a market that's looking around and while our data product helps people navigate what's come before them, what you're seeing happen in Q2 as companies starting to signal lower valuations and Youre seeing that also in the primary.
Fund raising data, which makes sellers more likely to enter into a transaction that they may not have entered into previously.
So.
The <unk> as I can be described as mark talks about in terms of latency.
Inventory really starts to move once buyers and sellers show and demonstrate a willingness to meet and make a trade. So that first trade in this period is part of what starts to establish that PD.
And then we start to reach.
That period of equilibrium across the board, but it really starts with individual names and right now what we're presenting your averages.
But internally on the desks were watching the individual names and I'd say the good news is signal that we're getting across the board from companies is noteworthy to strike.
All the way down the line starting to signal officially that they're raising money or proactively reducing the valuation in the public. So we will continue to watch that and we're optimistic that when it does come back we're going to be in a very advantaged place to take it to take and and deliver on that with the scale and the technology and data Bill.
Alright, Thank you very much.
Thank you.
Abbvie unless we have any additional questions we look forward to.
We are on the road in San Francisco, New York, and Boston This coming quarter.
So we're hoping to meet in person.
First time in a couple of years.
And we appreciate the time you've taken soon.
Balanced platform.
Yes.
Ladies and.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
Goodbye.
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