Q1 2023 Forge Global Holdings Inc Earnings Call
Hello, My name is Mallory and that'll be your conference shop Raider today at this time I would like to welcome everyone to the global first quarter financial results Conference call. All linked has been placed on each of your pets.
Round noise.
The speaker's remarks, there will be a question and answer session. If you would like to ask a question during the Q&A session simply press Star then the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I would now like to turn the conference over to Dominic <unk> head of Investor Relations. Please go ahead.
Awesome. Thank you ma'am.
Thank you for joining.
Joining us today for gorgeous first quarter of 2023 earnings call. Joining me today are Kelly Rodriguez gorgeous.
Lee.
They will show prepared remarks regarding the quarterly results and then take questions at the end.
Joseph.
J, we issued a press release announcing gorgeous first quarter.
2023 financial results.
A description.
A bar results today.
Is complementary to the press release, which is available on the Investor Relations page of our website.
This conference call is being webcast light and will be available.
There is also.
Investor presentation on a I R.
Page turning this conference call, we may make forward looking statements based on current expectations.
Forecasts and projections.
Today's date.
Any forward looking statements that we make our subject various risks uncertainties.
There are important factors that could cause actual outcomes to differ materially from those.
Included in the state and the statements.
We discuss these doctors in our SEC filings.
Including our quarterly.
Report on form.
10-Q.
Which has also been published recently.
As a reminder.
Required to update our 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 a meaningful when evaluating the company's performance.
Detailed disclosures these measures M. The gap reconciliations.
Refer to the financial data contained within our press release, which is also posted on the page.
Additionally, vehicle, Sir first quarter supplemental information, which we believe it's helpful to understand the business.
Today's discussion will focus on the first quarter 2023 results.
As always.
We encourage you to value both annual and quarterly quarterly results for a full picture of forges proponents.
Which can be effective by unexpected events that are outside our control.
With that let me turn it over to Kelly.
Thanks.
I'll start with a brief news and highlights before turning it over to Mark.
For the detailed financial overview for the first quarter.
And then I'll come back and closed at some of the market insights that we are seeing from our data.
Five continued challenges posed by the markets and the first few months of 2023.
Remain confident that forwards as well positioned for an eventual market rebound.
On the fourth platform.
Sell side interest remains strong.
And by sight interest is improving.
By sight indications of interest Jones, 37%.
Two one.
<unk> indications of interest grew 12%.
Q for.
We also observed by interest in a broader number of companies.
20% increase in Q1 over Q4.
While there is improving interest on both the buy and sell side.
One volumes reflected the continued uncertainty of market participants.
The economic outlook and the health of.
The banking industry, which affected volumes in the quarter and impacted total revenue.
We did see the take rate normalized compared to queue for reaching three 6%.
Up 29% quarter over quarter.
In total custodial administration fee revenue brooder, $10 $8 million up 9% quarter over quarter.
In addition, our total custodial accounts increase from $187 million.
219, $4 million, a 4% quarter over quarter increase.
We are encouraged by the fact that while investors have remained cautious throughout the downturn.
<unk> are turning to us for proprietary data.
And unique insights to help them navigate this moment.
Investors are watching unique signals and forges private market data, including trade price discounts compared to last funding ran.
The bid ask spread and the rate at which companies exercise their right of first refusal or rope.
The time their entry for re entry into this market.
We're also excited about the launch of our first index.
<unk> private market index, which we have designed to be the pre eminent benchmark for actively traded private companies, we launched afford private market index on may 4th.
While other benchmarks that target this asset class often rely on scale funding data.
Or fund level performance March.
The private market index reflects the recent performance and pricing activity.
Venture back late stage companies that are actively traded in the secondary market.
It's a tool that we believe just like in public markets and other established asset classes can be used to measure or attribute portfolio returns or track private market performance against other asset classes.
The first index speaks to the opportunity we see in front of us.
To drive the solutions that investors need to fully participate in this asset class.
We view this as a foundational steppingstone.
To a future where passively managed index solutions and other derived financial products.
Drive increased liquidity and open access to a completely new market settlement.
And we believe in marks a pivotal leap forward.
And unnecessary move forward in the development of an efficient transparent and liquid.
Market accessible all types of investors.
I will now handed over to Mark for a more detailed review of our queue one financials.
Thanks Sky.
We will continue to benchmark discussion <unk> performance in the first quarter compared to last quarter as we believe in smarmy all the focus our remarks on a comparison to the private corner given a unique economic environment and play at this time.
And the first quarter of 2023 are just part of our revenue last transaction based expenses totalled $15 $5 million.
$16.7 million last quarter.
Continuing volatility we wait.
<unk> in the corner.
Otto placement fee revenues last transaction based expenses reached $4.6 million from $6.8 million last corner.
Due to the market conditions that Kelly touched upon transaction volume for the corner decreased to $128 $2 million in Q1.
While our overall take rate increased from 2.8% last quarter to 3.6% in Q1, which is more on file historical norms.
Gorgeous custodial cash balances totaled $574 million in Q1 down from $635 million at the end of the last quarter.
The decline was largely driven by a spider cash transfers.
However.
There are early indications in this quarter.
Following the queue on spike.
Transfer's has slowed significantly.
I'll forge custody cash balances did drop the decrease was more than offset by the continued increase in the fed funds rate.
<unk> and total custodial administration is rising 9% in Q1 to $10.8 million up from $9.9 million last corner.
Total Cassidy accounts are $1.9 million in Q1 flat from last quarter.
Assets under capacity or 14.8 billion at the end of Q1 versus $14.9 billion last quarter essentially plan.
Total head count decrease.
339 at the end of March.
First quarter net loss was $21.3 million compared to $26 $2 million last quarter.
This improvement was largely driven by a reduction in stock compensation expense along with other proactive cost states.
In the first quarter, adjusted EBITDA loss improved to $13 million compared to a loss of $14.3 million last quarter as.
Is the expense savings and a quarter more than offset a slight decline in revenues.
Net cash used an operating activities was $17.7 million in the quarter.
The net cash used by operating activities at 9 million last quarter.
This increase was for the most part due to the payment of roughly $8 million in annual bonuses. After a year M. As we had previewed and our last call.
Cash and cash equivalents ended the quarter at approximately $175.3 million compared to $193.1 million last corner.
From a housekeeping perspective are weighted average basic number of shares used to compute net loss.
Hundred 72 million shares and are fully diluted outstanding share count as of March 31st was 187 nine shares.
The second quarter of 2023, we estimate of 173 million weighted average basic common shares for EPS modeling purposes.
In summary, we are continuing to monitor the state of the markets and manage our cost structure gorgeous committed to lowering our overall burned in 2023 and to being good stewards of our capital.
Back to Kelly for a brief market overview before we turn it over for questions.
Thanks part [noise].
We're moving to market in size I wanted and noticed strategic addition to the Ford Ford.
Divers or party Chief Technology officer of toast.
Recently joined our Gore.
Bevers extensive leadership experience across world-class financial services technology and consumer companies makes for a valuable addition to our board we look forward to working with Deborah and leveraging our expertise as we continue to execute our long term strategic plan and further stay on the private market asset class for the <unk>.
Future.
Now moving on the market and sites.
As published in our April private market update we noted.
Despite concerns over possible ripple effects from the Silicon Valley Bank and other bank collapses as well as ongoing interest rate increases and recessionary ears, both public and private markets closed the first quarter showing some signs of Brazilians.
Banking issues cascaded by the collapse of SDB did cause a temporary disruption in trading activities as many companies investors scrambled to understand their exposure.
Swift action by the government and regulators to send the fallout.
To have avoided some of the worst case scenarios.
The banking crisis was an additional distraction.
Price dislocation continue in Q1 as investors remains cautious.
As for which has noticed since we started publishing the private market update private markets generally lag public markets.
We're monitoring the unique signals and gorgeous private market data that we believe could be added to market participants ability to identify the body.
May also give indications of any signs of a rebound.
As we published in our April private market update.
Served after several quarters of steep valuation declines through 2022 prices unclosed trays held steady from Q4 to Q1, averaging about 51% discount the last primary round in both quarters.
We noted a slight narrowing of the bid ask spread.
21% from 23 at the end of the queue for and down from a peak of 28% in August of last year.
And Q1, we saw the rate at which companies are exercising the right of first refusal to buy back shares.
Reach its highest level in the last two years.
As I noted the top of the call.
This.
The activity on the force platform and Q1 compared to Q too.
And a 20% increase in the breath of issuers in which investors place bids.
So.
We feel encouraged about the interest and activity on the platform.
Based on what we can see so far in the court.
We expect second quarter market results to exceed those of Q1.
We can sum up the sentiment in the market like this.
Just like with public market investors.
Private market investors don't want to catch the following night.
But they do want to be the first to pick it up.
We're helping investors prepare for what comes next with actionable private market data.
Insights that investors need to time to re entry into this market.
And we said this before but we're optimistic about our positions from the market inevitable returns.
At Forge, we continue to leverage our strongest assets our team our technology and our prudent management of capital to build momentum and managed to do this cycle.
While there are many macroeconomic factors out of our control.
We have taken measures steps to support our business.
And come out of this period ahead.
And we continue to make progress.
To deliver solutions.
Data inside.
Insights and trading capabilities.
Institutional investors will increasingly recognized as a competitive advantage.
All market participants can leverage to access.
Navigation the private market.
Thank you.
Salary increase open.
Quick question.
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.
First question comes from Devon, Ryan with G. M T Securities.
Hi, This is Michael Falco on for them and good afternoon.
Wanted to start on the customer business, obviously cut.
Faith took another step up in the quarter.
Custodial accounts is also up but Mark I believe you mentioned a spike in cash transfers can you just provide maybe a little bit of insight on what drove that spike in transfers and maybe how we should be thinking about cash sorting dynamics from this point forward.
Hey, this is Kelly I'm going to let Mark answer that question about cash, but I wanted to clarify one point that I made in the prepared comments.
<unk> said as we witness IRI activity on the horse platform in Q1 compared to Q too I meant to say.
Q for so.
For those of you who heard that the reference was comparing Q1 to queue for not Q1, Q2, and so that was a 20% increase in the breath of issuers in Q1 over Q for just to make that crystal clear.
So I'm sorry was this microdevices.
Yeah go go ahead [laughter], Okay. Alright go ahead Martin Yes. So your question was just looking for further detail in terms of the movements of cash at the press company correct.
That's correct Yep.
Yeah. So so so Mike Leigh specifically I was specifically refer to it as cash transfers.
As opposed to Verizon specifically call out cash <unk>.
From our perspective, our visibility.
What we literally see is.
Looking at the cash inflows into cash outflows.
And out of the Trust company and as we see those as we saw those transfers increase during Q1 going to other financial institutions.
I think we would speculate that cash starting as a major component, but but we simply don't C. D and the destination. We don't know if that cash is going to be investing in higher yielding securities and equity.
We don't actually know kind of ultimately were aware of the customers are moving their cash. So that's why we're kind of eliminating our description to cash.
Cash transfer Bryan and so so this is a number that I think we have started to see some.
Movement towards the end of the year and we saw we did see an increase.
M Q1, but as I noted earlier, there's a significant drop often and that transfer is out.
As we have completed the month of April .
Sure. That's helpful. And then maybe just to shift gears, a little bit on the operating backdrop. Kelly I believe you mentioned you know some of the banking industry turmoil that impacted volumes during the quarter and it sounds like there's maybe several positive factors that are indicating that the environment, maybe stabilizing a little bit heading into two Q.
We're about halfway through the quarter is there any kind of quantitative insights that you can provide on how things to progress to date and I guess what are the key indicators that we should be watching that may underlie a broader rebounded activity on the platform from her trading activity.
That's what we're not we're not providing specific.
Kpis or metrics here as I said towards the end.
We do have a view based on what we see right now.
That you too will do a low battery Q1 now.
Did reference three.
Different signals and we've talked about these before and so the combination of them just to reiterate.
Are the bid ask spread.
Narrowing.
And really for the last six months seeing that discounts and clothes.
Pricing being consistent from the beginning a Q4 through the end of Q1, so that does.
Indicate.
A flattening of discounting in the market.
And then finally those those Roper numbers, we had mentioned need last year at one point cause they pass, but the roper numbers coming in at 11% is the highest we've seen it in two years I think in 2022, it was somewhere averaging around 6%. So the fact that.
Companies and insiders are buying back at this rate.
Is another interesting signal for us, but those are the ones that I would say our clients are looking at and we're tracking them closely to but we're we're sort of letting the the customers a forge make.
<unk> calls on where we are relative to the market, but we do look at those three signals optimistically.
Great. That's been helpful contacts. Thank you I'll hop back in the queue.
Your next question comes from Rich <unk> with Piper Center.
Yeah, Good morning, Kelly and Mark and I guess, the first question is on the take rate.
<unk> it rebounded this quarter from the fourth quarter and last quarter, you talked about having to get sick liquidity on with third parties is that the reason why rebounded that you didn't have to do that.
In the first quarter and what change because you know because certainly we've.
We've seen how difficult volume, but.
But what change was I guess where liquidity was.
I guess, it's a question to get that take right up.
Yeah, Hey, rich this is mark so yeah.
You kind of hit it on the head.
While we called out in Q4 with.
A large increase in the number of transactions, where we were working with external third parties and basically splitting the revenues on those transactions and what happened in Q1 was that no I'm.
Not that number normalized too I mean, we're always the out there you know.
Looking to complete trades and normally we can <unk>.
Cross trades.
Internally between buyers and sellers on the porch that work and from time to time.
Will partner with outside third parties to complete a trade for the benefit of our customers and we saw an unusual increase in activity in Q4, and Q1 kind of was a return to more normalised levels up that the use of outside third parties and our trades.
Oh, Okay, I guess I'm, assuming that that will like <unk> could maintain itself.
Going forward.
If you could address.
Yeah, <unk> I would say that when you looked at the prior year.
He looked at the various quarters.
It was pretty common that one quarter out of the year, we would see kind of uplift and it's relatively random is situational based on the names that were training and the buying and selling interest in any particular given names we had a blended rate of 3.3% for 2021 and for 2022. So so.
Consistent right year over year, and we're not suggesting any overall change and take rates going up or down broadly speaking, how we're not raising prices were not dropping prices you know and as we said before.
The <unk> will take raging any given quarter will be a blender that makes a business, we're doing whether that be it.
Institutional and more block oriented more retail oriented.
To use a third party. So there's multiple variables that can drive the tech writing in any given quarter, but I think we're we're.
Trying to share that our our view in terms of overall plan and take races is relatively stable.
Okay. Thank you and one last follow up is sort of on the volumes Kelly.
I'm just trying to see whether.
You know how things progress may be through the quarter was the bank.
Banking crisis, even though it's you sort of.
Imply that it it's healed now but did did that have an impact in the quarter and then.
Tied to that is.
The metrics that you're talking about how long does it take when you see some improvements like.
You're fighting your head you know and it's industrywide headwind in sort of capital markets activity.
And.
Like how.
How soon.
These metrics how correlated are they I guess would determine how quickly they predict the turn.
So let me start with the first question, which was.
We came into that we came into Q1.
Watching pipeline and we continue to do that.
The banking impact really happened in the second half of the quarter and it's hard to quantify just based on the way things emerging pipeline and ultimately close, but we know that disrupted installed.
Trades delayed.
Delayed activity for some period of time we.
We didn't and don't prepare.
An exact number for how much it affected it but.
There was certainly a period there.
Where everybody was checking the brakes.
And looking at what was going to be the state of money. If you had to move whether they could move it. So there are a number of factors there that we were watching like everybody else day to day.
We feel pretty good about where it is right now, but like everybody else, we're watching the broader bank.
Regional bank sector right now as well.
Now in terms of.
How long it takes for some of these metrics to to deliver we're a little bit in unchartered waters.
Right now because it's been probably.
Probably a few years since we've seen the market.
This rupture and given all the factors that are going on right now, it's really tough to predict it I will say this seeing the price discounts sustained for.
Close to six months.
It is a positive indication.
That the discounts have have reached kind of a correlation to the public market.
And so I'd say, we set for awhile, but the private markets.
Will react similarly to the public markets. It just takes them some time.
We believe we fully caught up now.
And so we're like everybody else watching other macroeconomic factors, which would indicate that people should come back yet, but the other interesting data point here that I just want to double click on a little bit is are the rover numbers because that's the one that says that.
And people, who really know the performance of the company because look the ultimate.
The ultimate trigger for more liquidity is more information and.
More volume and I'd say in the in the Rover numbers, you see indications of buyers who have more.
Detailed performance.
Data on company had been anybody else.
And the fact that they are buying it elevated levels through those buybacks.
At 12% is encouraging.
Need to keep watching that one and we'll be sure to come back rich and report on that coming out of.
Coming out of Q2.
But we haven't seen company buybacks like this since.
2020 so.
We're watching it carefully.
I would add also.
I mean, if you look at public markets in 2023, thus far.
Perhaps somewhat volatile our choppy.
Public markets have kind of come off their lows.
From towards the end of the year.
And.
As we talk about the private markets it takes longer right that that process.
Integrating information and price discovery is just as is more difficult and.
Alternative assets and left the liquid markets, but hopefully the sign that the public market that starts to come off their bottoms and the stabilization of evaluations that we're seeing trade in the private markets.
Hopefully that that provides an indication.
Perhaps things will improve.
[laughter].
Got it. Thank you very much very helpful. Thank you.
Your next question comes from online with Oppenheimer.
Good afternoon, and thank you for taking my question.
Could you. Please talk about all give us an update on the head kind of expectation. This year to you still expect it to be kind of flat from I think 203 deny employees any more color will be helpful. Thanks.
Yeah, Hey, Owen.
For the question we.
We are still operating under a head count freeze.
Obviously.
There is a Christian there's backfilling, but overall, we're still operating.
With a goal to maintain our overhead or overall headcount.
Slash.
Obviously, we're going to continue to monitor.
How the year evolves and what we see happening in terms of our trading volume revenues, but.
But at this point.
We're still maintaining that.
Flat head count posture.
Okay got it that's helpful.
On private market index, how is it different from from other <unk>.
Competing private market index out there.
Do you have any plan to monetize this index like licensing to asset manager or creating an exchange rate product Dom to roll or it's still too early to to say thanks.
Well, let me start this is Kelly I'm gonna start and all that large jump in here and I have been both very close to this launches.
Strategic priority for us here forge.
And I'll start by saying that the most significant differentiator.
As we sat back and watch for the last couple of years, others announced the private market indexes, which are largely based on last funding rounds.
We fundamentally believe that those.
Our sales data points, particularly at the market does what it does.
Goes down and demonstrates that kind of volatility that is demonstrated.
And both Mark and I have backgrounds in asset management ourselves and I've seen fund marks.
There are that are put out by by participants funds, particularly have a lag effect in terms of reflecting the true value.
These companies trade out, particularly the ones that are most traded in the space. So we really are excited about filling the gap.
Around data and March that represent the most actively traded companies in the U S. So we feel really good about how we stack up competitively.
As it relates to the future Mark you might want to jump in here about our views and options going forward.
Yeah, Hello, and thanks, Thanks for the question.
As Kelly said this is an area that.
We're both Super excited about I think barges in a really unique position to lead the market.
With this product and system.
Really quick background.
The numbers for context.
And I think people are very familiar with in the season the public markets. There's over 5000 market indices that are being used there's about 12, <unk> 12 trillion dollars.
<unk> managed domestic equity funds, 54%, which employ a passive strategy. So I think I think we all know.
Familiar.
With major indices like S&P 500, and the.
The rest of NASDAQ, let's see.
And and.
We know how important they are to to to to the markets on the public side as Kelly said I mean, there are some industries that are out there any you mentioned how the ones that are based on there are there is is that are based on.
Last last funding round.
Look at our index of large private market index and you look at 75 names and compose them. If you look at all the underlying information that we're using to construct the index and cafes and returns.
90% of the names.
Are based on information.
That is three months or less.
Terms in terms of how.
Relevant information is.
Versus longer David and 100 per cent of our data is 12 months or less based on information 12 months or less if you look at those paying 75 names and you were to base it on funding round data.
Then almost 90% of the names however.
Have a funding round in excess of one year and when you look at some of the other indices that are using funding round. They showed positive returns in 2022 and you just know that that wasn't the case in 2022 since and so.
<unk> the most important point and take away I think we're trying to stress is is just how different.
Relevant.
Private market index is.
To the second part of your question.
I mean, we think it's a massive opportunity Brian I mean, the intellectual property the value of three.
Putting out index products I think you guys are more familiar very familiar with kind of the <unk>.
Profitability.
Some of these very large index companies assess it so so it's a high margin.
Scalable business.
We think there's tremendous opportunity I think Ken Kelly made a point of talking about how we think this opens the door to passively managed.
Passively managed funds in the private market space and I think we're well positioned to take advantage of that and so.
We don't have any more details provided at this point in time Owen.
We're really excited.
Ran the right place at the right time.
Strong.
Your next question comes from Ken Weddington with J P. Morgan.
Hi, how ya doing good afternoon. This is Michael <unk>.
<unk> I guess it just.
Wanted to touch on competition as well just kind of.
Can only work just give me your comments and ongoing volatility and depressed transaction volumes I guess, one of your kind of seeing and given that's been going on for some time now have you seen any changes from my from a competitive perspective.
And then too if we are in fact, passing a trough in terms of volumes.
<unk> <unk> I mean, they're an area that torch would look to be more.
More aggressive in terms of investments or rollouts or products and.
And would you also be at which point would you be uncomfortable unfreezing iron as well thanks.
Oh, Okay, well, let me start with.
With competition, where clearly.
Monitoring.
Competition as we've talked previously about our own strategy.
We've clearly.
The market is a global market.
And we think part of this moments.
In terms of.
Difficulty in raising capital for anybody.
I'd say our competitors.
Our challenge to raise the kind of capital requires that we think.
Is important to invest.
At this stage of the private market. So we're looking at our infrastructure investments and looking around at our competitors and what we have seen a few announcements recently, we haven't seen anything.
That.
Concerns us overly we believe that the investments we're making in our current market data in custody infrastructure for institutions and the broader participants will help us come out of this time and prevail. We do expect some consolidation in the space. It's just natural.
During difficult market times scale and capital balance sheet capital matter.
So we feel like we are.
In a really good place there.
In terms of future investments.
We're really focused on data and the announcement.
Around the index is just one other facet.
Data, we think that the market needs data, we think that the market would benefit and liquidity would expand in fact.
When when 2021 was was was it full with full bore people were asking me about what the next three to five years look like and I said, then we thought that transparency of information and standardization of tech, where the key to creating more liquidity in the market had we gotten more of that investment under.
Way, you would see a more liquid market and downtime that we're seeing right now so you're still seeing.
A vanilla liquid market right now and the need for more information I think with that translates into for US as it continued investment in infrastructure around data and standardization of tech to allow more participants globally participate in the private markets and with that.
We're looking at our own revenue pump composition the ricker.
Recurring components of data and data subscriptions are really important to us. So we're going to continue to stay focused on that.
On the institutions that.
Are lining up to enter the space for the very first time I mentioned this on the road show a year and a half ago institutional investors that previously weren't in the private markets are coming into it now we've seen some disruption here, where everyone's wanting to see where prices and up and so I'd say going back to the data points and signals on the platform.
We're really excited about where we sit right now, but I would say looking forward, probably being more aggressive and standardizing technology for institutions.
For building out our data infrastructure and continued distribution of our data.
Globally.
Okay, great. Thank you for the color.
That's great and then I just wanted to quickly switch gears just unexpected.
I guess I guess when is there anything to to <unk> dot com.
And it gets just outside of that anything to call out in terms of.
<unk> first quarter comp and in Nevada kind of.
Normalized number we should have been our head in terms of comp and maybe total suggested expensive as well.
Okay hold on hold on I think your first the first part of your question.
Didn't come through if you could repeat it.
It had to do with expensive, but not the <unk> part.
What did you say before the comp part of the question. So I'm I was just asking about.
Normalized calm and I had reference normalized.
Normalized dotcoms as well so normalized com, okay. If one to us is to normalize number we should have.
Same what's dot com and then kind of total adjusted expensive as well. Thanks, Okay. So I'm gonna I'm Gonna, let Mark Lee addressed the Q1 cop number I know he'd mentioned that we had our our annual bonus number and that Q1, so I'll, let him get to that but I didn't want to make one point before I turn it over and that was you asked at the.
End of the previous question, what would cause our head count.
To to go in the other direction and clearly it would be signals from the market that shows sustained improvement in our pipeline.
And a recovery that was translating and the volumes on the platform I'd say that that's what we're watching if we were going to make any change in our direction.
Round head count and staffing there's a ton we can do here and we've had to.
Really practice discipline around being focused on the things that we really need to build with the head count and bird that we seek to achieve in 2023. So we're not gonna come off from that position unless we see.
Real real sustained indications.
Indications that our pipelines improving so I want to make sure that gets hurt by everybody on the call and I'll turn over the question relating to Q1 call Tomorrow.
Hey, Michael So, yes, Q1 com represents a fairly normalized number.
I mean, if you.
Exclude incentive compensation if you it's.
Stock compensation, and you look at baseline salaries and wages and benefits.
It is a good baseline as you'll recall in queue for we announced that we took a small reserved for some strategic reductions.
We were making at the end of the year and so we realized those benefits.
In Q1.
And in that sense.
When is a good baseline now the one thing I would I would caution, though is that particularly in our technology area, we employ a mix.
Employees and consultants and contractors in our technology consultant contractor show up in the Tech and communications line <unk>.
Separate from our wages and salaries in southern at times interplay between those two different rows of the income statement right. If we were to add more employees and have less contact US consultants you might see an increase in wages offset by a decrease in.
The <unk> line or vice versa, right. If we were to add more consultants and contractors then.
At the expense of or in lieu of.
Of employees than.
Then you might see some flip back and forth across this tomorrow's, but yes, I think that are.
Are people related costs are probably including stock cop about 70% of our total operating expenses on it and Q when's a good baseline for you know the second part of your question was about stock compensation.
And the answer is that yes, Q1 represents a more normalised run right and do you recall in 2022.
Had explained in Baghdad provided forward guidance about compensation, because we had.
This bat retention orange juice related to the Gulf Baalbek transaction that have accelerated amortization.
Start to amortize one month and Q2 three months in Q3, and one month in queue for some so that portion of the retention orange juice that accelerated has now all the <unk> all now been fully amortize and so now I know what you're left with in Q1 is really a normalised run right.
Compensation absent any changes that would accrue from either new grants.
New stock brands or recapture a slap brands from people who are terminated reviews the company.
Okay, great. Thank you so much.
[noise] Hi can I get your questions at this time.
Thank you Mallory we appreciate all of your time and we look forward to the coming conversations over the next couple of months on the road.
Thank you Mallory can end the call.
Ladies and gentlemen that concludes today's conference call. Thank you for joining you may now disconnect.
[noise].