Q3 2024 Forge Global Holdings Inc Earnings Call

Ladies and gentlemen, this is your operator speaking. Today's conference call will begin momentarily. You will be placed on a music call until then. Thank you for your patience.

The

John: Good afternoon, my name is John and I'll be your conference operator today. At this time, I'd like to welcome everyone to the 4 3rd quarter fiscal 2018-4 financial results conference call.

On today's forge global call, we'll be Kelly Rodriques, CEO, Mark Lee, CFO, Lindsay Riddell, Executive Vice President of Corporate Marketing and Communications, and Dominic Paschel, SPP of Finance and Investor Relations.

If you would like to ask a question during this time, simply press starfall by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. And now I will turn the call over to Lindsay Riddell. Ms Riddell, you may begin your conference.

Lindsay Riddell: Thank you John and thank you all for joining us today for Fortress 3rd Quarter 2020 Fort running call. Joining me today, a Fort CEO, Kelly Rodriques, and Fort CFO, Mark Lee. They will share prepared remarks regarding the quarters results and then take your questions at the end.

Lindsay Riddell: Just after Mark it close today we issued a press release announcing for the third quarter of 2024 financial results. A discussion of our results today, compliments the press release, which is available on the investor-relations page of our website.

Lindsay Riddell: This conference call is being webcast-lives and will be available as a replay for 30 days, beginning about one hour after the conclusion of this call. There's also an investor presentation on our IAR page.

During this conference 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.

Lindsay Riddell: And there are important factors that could cause actual outcomes to differ materially from those included in these statements.

Lindsay Riddell: We discuss these factors in our SEC filings, including our quarterly report on Form 10-Q, which can soon be found on the IR page of our website and the SEC filings website.

Lindsay Riddell: As a reminder, we are not required to update our forward-looking statements.

and I'm going to be talking about the the the the the the the the the the the the the the

Lindsay Riddell: In our presentation today, unless otherwise noted, we'll be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance.

For detailed disclosures on these measures and the GAP reconciliations, you should refer to the financial data contained within our press release, which is also posted to the IR page of our website. Additionally, we have posted our third quarter supplemental information on the same page.

Lindsay Riddell: Today's discussion will focus on third quarter 2024 results. As always, we encourage you to evaluate both annual and quarterly results for a full picture of FORGE's performance.

Lindsay Riddell: which can be affected by unexpected events that are outside of our control.

Speaker Change: With that, I'll turn it over to Kelly.

Kelly: Thank you, Lindsay and Dom. Good afternoon, everyone, and thank you for joining us today.

Kelly: I'll start today with a high-level summary of our results and touch on a few of the highlights from the quarter.

Kelly: These include exciting technology and product innovations that are helping us to expand access and improve the experience for all participants in the private market.

Lindsay Riddell: In Q3, Total Revenue Less Transaction-Based Expenses for the Quarter.

Lindsay Riddell: totaled $19.1 million, down from Q2 2024, but up compared to the year-ago quarter.

Lindsay Riddell: Net marketplace revenue slowed to $8.6 million as the pre-election summer months were marked by slower trading activities.

Lindsay Riddell: but was up 21% year-over-year.

Lindsay Riddell: We continue to see a broad set of investors.

Lindsay Riddell: engaging in the market through our platform.

Lindsay Riddell: while we deliver access across the spectrum of participants.

Lindsay Riddell: Institutions make up our largest book of business.

Lindsay Riddell: There are more than 20,000 institutions registered on our platform.

Lindsay Riddell: and institutions account for at least two-thirds of our by-site volume annually since 2021.

Lindsay Riddell: Institutional investors come to FORGE because of our credibility, our track record of delivering access, and closing trades, and because of the unique proprietary pricing insights we're able to deliver through our platform to inform investment decisions.

Lindsay Riddell: To that end, in Q3, we announced ForgePrice, a breakthrough in pricing transparency for the private market.

Lindsay Riddell: ForgePrice is a single, derived share price for more than 240 of the most liquid private companies.

Lindsay Riddell: It serves as an indicator of the most current price per share of a company based on a combination of secondary market transactions

Lindsay Riddell: recent funding rounds and indications of interest.

Lindsay Riddell: Of course price is the pricing model that underlies our indices.

Lindsay Riddell: and that feeds the up-to-date pricing insights delivered through our platform.

Lindsay Riddell: I'm sorry. I'm sorry. I'm sorry. I'm sorry.

Lindsay Riddell: We believe that the unique insights into up-to-date pricing serves as an advantage when it comes to evaluating trends in the performance in the private market.

Lindsay Riddell: In September, we identify the Private Market Magnificent 7.

Lindsay Riddell: a group of the largest, most resilient, and best performing companies in the private market.

Lindsay Riddell: ForgePrice makes this type of analysis and market insight possible.

Lindsay Riddell: And we're excited about the potential for future partnerships and visibility now possible with George Price.

Lindsay Riddell: Our continued investment in the FORGE® Next Generation platform

Lindsay Riddell: allows us to better expose pricing data, improve the client experience, and drive further efficiency into the trading process.

Lindsay Riddell: We believe we're already seeing results from enhancements we made in Q3 to our client onboarding experience. It makes it easier for clients to make decisions and enter competitive bids and offers in private market shares.

Lindsay Riddell: We aim to provide the most advanced globally scalable platform and expand access for participants in support of the capital and liquidity needs of world-changing companies.

Lindsay Riddell: Through the deployment of the FORGE® Next Generation Platform, we believe we are realizing that objective.

Lindsay Riddell: Now, before I turn it over to Mark Lee to give a detailed look at our financials for the quarter.

Lindsay Riddell: I wanted to give an update on what we announced last quarter regarding our intention to accelerate our timeline to profitability.

Lindsay Riddell: with the aim of reaching break-even adjusted EBITDA in 2026.

Lindsay Riddell: We took additional actions in the third quarter to set that goal in motion. As you'll hear from Mark, you'll see an increase in adjusted EBITDA loss in the quarter.

Lindsay Riddell: This is related to one-time severance expenses.

Lindsay Riddell: associated with the announced reduction in force.

Lindsay Riddell: and other personnel expenses.

Lindsay Riddell: as we prepared the organization for profitability.

Lindsay Riddell: We anticipate narrowing our adjusted EBITDA losses in the coming quarters as per our plan.

Lindsay Riddell: However, along the way, we'll also invest in engineering support from offshore resources.

Lindsay Riddell: which will ultimately reduce our future engineering costs but may result in increased engineering spend over the next couple of quarters.

Speaker Change: So with that, I'll turn it over to Mark for the detailed financials and then follow up with a look at the broader market and view into what's next for Forge.

Speaker Change: Mark.

Mark Lee: Thanks, Kelly.

Lindsay Riddell: Thank you.

Lindsay Riddell: In the third quarter of 2024, FORGE's total revenue less transaction-based expenses was $19.1 million, as compared to $22 million from last quarter and $18.4 million in the year-ago quarter.

Lindsay Riddell: After five quarters of sequential revenue growth, we experienced the anticipated seasonal summer slowdown.

Lindsay Riddell: As we enter the fourth quarter, we are seeing positive trends in our leading private market indicators.

Lindsay Riddell: such as declining bid-ask spreads and improving valuations.

Lindsay Riddell: However, factors including the highly contentious U.S. presidential election, the uncertain pace of Fed interest rate reductions, and continued geopolitical instability and conflicts have weighed on investor sentiment.

Lindsay Riddell: Total marketplace revenues, less transaction-based expenses, totaled $8.6 million in the current quarter compared to $11.4 million in the prior quarter.

Lindsay Riddell: This represents a 21% improvement from 7.1 million in the year-ago quarter and an 87% improvement from the trough of 4.6 million recorded in Q1 of 2023.

Lindsay Riddell: That's three.

Lindsay Riddell: Year-to-date total marketplace revenues, less transaction-based expenses.

Lindsay Riddell: have increased 64% to $28.6 million.

Lindsay Riddell: from $17.4 million for the corresponding nine months in 2023.

Lindsay Riddell: Transaction volume for the quarter of $338 million decreased from $426 million in the prior quarter. Meanwhile, year-to-date volume is up 99% to $1 billion from $515 million on a year-over-year basis.

Lindsay Riddell: Our net take rate of 2.6% declined slightly from 2.7% in the prior quarter.

Lindsay Riddell: As we've talked about in prior quarters, net take rate fluctuates depending upon the mix of trading in any given period.

Lindsay Riddell: Through 2024, trade sizes have increased 11% over 2023.

Lindsay Riddell: which has contributed to our significant volume growth.

Lindsay Riddell: while at the same time driving take rates lower.

Lindsay Riddell: In addition, we are also observing greater customer interest in third-party investment vehicles.

Lindsay Riddell: While this adds another means of accessing liquidity and highly sought after private companies

Lindsay Riddell: Take rates are often lower for these types of transactions, which FORGE facilitates.

Speaker Change: Total custodial administration fees were $10.5 million, roughly flat to the prior quarter.

Lindsay Riddell: Our custodial cash balances total $470 million at the end of Q3, as compared to $495 million at the end of Q2, and $505 million at the end of 2023.

Lindsay Riddell: The rate of decline in custodial cash balances has been steadily improving.

Lindsay Riddell: with a modest 7% year-to-date decline in 2024 from an annual decline of 20% in 2023, as the long-anticipated declines in the Fed fund rates have finally started.

Lindsay Riddell: As of the end of Q3, total custody accounts were $2.3 million and assets under custody were $16.6 billion, both essentially flat to last quarter.

Lindsay Riddell: Our $18.8 million third quarter net loss increased from $14 million quarter over quarter.

Lindsay Riddell: This higher loss was attributable to $2.9 million in lower revenue, $0.4 million in higher operating expenses.

Lindsay Riddell: and 1.5 million in lower other income, primarily due to less favorable reductions in the fair value of warrant liabilities.

Lindsay Riddell: In the third quarter, our adjusted EBITDA loss was $11.4 million.

Lindsay Riddell: compared to a loss of 7.9 million last quarter in line with the larger Q3 net loss excluding non-cash items.

Lindsay Riddell: The third quarter includes approximately $1.2 million of partial quarter run rate savings associated with our August cost reduction actions.

Lindsay Riddell: offset by $2.6 million in associated severance expenses.

Lindsay Riddell: Net cash used in operations during the quarter was $5.8 million compared to $14.4 million last quarter.

Lindsay Riddell: And as a reminder, the prior quarter included expenditures of $8.4 million associated with the resolution of legacy legal matters and payment of annual corporate insurance premiums.

Lindsay Riddell: Cash, Cash Equivalents, and Restricted Cash ended the quarter at $115.6 million compared to $121.6 million last quarter.

Lindsay Riddell: As of September 30th, our total employee headcount sits at 307, down from 327 at June 30th.

Lindsay Riddell: This headcount excludes contractors.

Lindsay Riddell: including a growing number located offshore which augments our technology capabilities in a cost-effective manner.

Lindsay Riddell: From a housekeeping perspective, our weighted average basic number of shares used to compute net loss was 184 million shares, and our fully diluted outstanding share count as of September 30th was 201 million shares.

Lindsay Riddell: For Q4, we estimate 186 million weighted average basic common shares for EPS modeling purposes in a lost position.

Lindsay Riddell: Thank you.

Lindsay Riddell: As we've said in the past, we continue to focus on maintaining our cost discipline and expense management.

Lindsay Riddell: as we drive towards our goal of breaking and adjusting EBITDA in 2026.

Lindsay Riddell: We will, however, continue to balance this against investment opportunities that we believe

Lindsay Riddell: will have strong ROI. I'll hand it back to Kelly for a brief market overview before we turn it over for questions.

Kelly Rodriques: Thanks, Mark.

Kelly Rodriques: Even while the market has been cautious in the lead-up to the election and against the backdrop of mixed macroeconomic signals,

Kelly Rodriques: We noted in our October Private Market Update that median valuations for companies trading on the Forge platform are trending up.

Kelly Rodriques: The median discount moved up to negative minus 8% and minus 12% to last funding round in the last two months of the quarter.

Lindsay Riddell: These are the two lowest monthly discounts recorded in the last two years.

Kelly Rodriques: and the bid-ask spread descended to 5.5% in September.

Speaker Change: AI is driving more of the rising valuations.

Speaker Change: and our Forge Private Market Index, which tracks the 75 most liquid companies in the private market. It counts 34 AI companies.

Kelly Rodriques: among its constituents as of its most recent reconstitution on October 1st.

Lindsay Riddell: While there are standout private companies across sectors, AI has become a more prominent influencer.

Lindsay Riddell: of private market performance with each passing month. And we expect to see AI continue to influence private market performance going forward.

Lindsay Riddell: In terms of the IPO environment,

Lindsay Riddell: We believe a known outcome for the election, as well as continued improvement in additional economic factors, such as interest rate reductions,

Lindsay Riddell: and an improving inflationary environment could lead to more robust primary funding and IPO markets in 2025.

Lindsay Riddell: We've talked over the past several years about the private market tipping point.

Lindsay Riddell: We have invested heavily in the growth drivers that will accelerate that tipping point now and in the future. This includes the Forge Next Generation platform, where private market data and trading activity come together, creating greater transparency, insight, and opportunities for participation.

Lindsay Riddell: It's the basis on which we built Forge Pro.

Lindsay Riddell: combining comprehensive data and order management capabilities in one.

Lindsay Riddell: Approximately 280

Lindsay Riddell: of our most active clients.

Lindsay Riddell: who represent more than 16% of our revenue through the first 10 months of the year are now using ForgePro.

Lindsay Riddell: Forge Pro represents data-enabled revenue.

Lindsay Riddell: that we expect will grow to a more substantial part of our business over time.

Lindsay Riddell: We previously announced the Investable Forge Equity Private Market Index.

Lindsay Riddell: What we haven't talked a lot about is FORGE Global Advisors, our RIA, through which we've created more than 150 investment vehicles.

Lindsay Riddell: with about a hundred currently active.

Lindsay Riddell: These are relatively liquid and serve as the access point to the cap tables of many of the largest and most sought after unicorns in the world.

Lindsay Riddell: We believe these investment vehicles strengthen our relationship with companies and make us a continuous source of capital for them and of supply of private shares for investors.

Lindsay Riddell: We will continue to scale and evolve the RIA as a central hub for capital sourcing for companies and investment access for market participants.

Lindsay Riddell: In terms of our outlook for the quarter, our expectation is that we will come in at par or better to this quarter in terms of marketplace revenue based on what we know today.

Lindsay Riddell: With the election behind us, we're hopeful that the uncertainty that weighed on investors throughout the last several months will subside and that we'll see sustained investor confidence and a meaningful recovery of the primary funding and IPO markets in 2020.

Lindsay Riddell: Bye.

Lindsay Riddell: With that, let me turn it over for questions. Thank you.

Lindsay Riddell: Thank you. Thank you.

Speaker Change: John, can you put your line?

Lindsay Riddell: Thank you.

Speaker Change: Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question at this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. We'll pause for a moment to compile the Q&A roster. Thank you.

Speaker Change: Your first question comes from the line of Patrick Moley with Piper Sandler. Please go ahead.

Patrick Moley: Yes, good afternoon. Thanks for taking the question. So, Kelly, you mentioned there at the end of your prepared remarks you expected marketplace revenues this quarter to be as good or better than the previous quarter. Could you maybe just talk about what you're seeing? Is that based on, you know, activity levels through October, or is there an expectation that things are going to pick up in the end of the year? Thanks.

Speaker Change: Historically, Q4 has seasonally been the biggest quarter of the year.

Speaker Change: and 2024 has returned to a more normalized

Speaker Change: seasonal set of expectations. So I'll start with that.

Speaker Change: I'd say that we have seen, as I mentioned in the script, some impact around seasonality in three, and we also saw some impact around people's expectations for resolution around the election results.

Speaker Change: The

Speaker Change: Numbers of bids and ratios of bids and asks on the platform are indicating that we're moving back into a more normalized time. I'll let Mark add some of the metrics he's tracking here in a second.

Speaker Change: But I'd say that, overall, we think that getting through this election cycle was probably the biggest influencer to our views of how the rest of the year will play out, so we're pretty optimistic about it.

Speaker Change: Yeah, hey Patrick, so kind of just to fill out some of the comments that Kelly just add to that.

Patrick Moley: You know, so the positive, I think, leading indicators that we feel good about are valuations.

Speaker Change: Just to kind of reiterate, you know, median discounts of 8% in August, 12% in September. Remember that's compared to kind of the bottom of 62% discounts to the last round in September of 23.

Speaker Change: That's kind of one positive thing. 5.5% bid-ask spreads in September, compared to a long-term average of 11.3%. And that 5.5% is even better than the average spreads we saw in 2021 of 5.9%.

Speaker Change: We saw that the top 25 of the most traded stocks in 2024, 20 of them have traded with positive returns.

Speaker Change: And then the bid-ask spread, Kelly talked about that, 54% buys in September, 52% average for 2024. And as you remember, that compares to really low percentages in September.

Speaker Change: up 39% in 2023 and 35% in 2022 where roughly two-thirds of our Iowa activity were coming in from sellers, right? So I think those are all the possible leading indicators. The one thing I would remind you about...

Speaker Change: I mean we feel good that

Speaker Change: You know the at least the uncertainty around the elections is now over And that we can kind of move forward now Without that kind of hanging over the market, but as a reminder Recall that the settlement process for our trades

Speaker Change: You know generally speaking going through issuers It's a four to six week time frame right for selling our direct trades So that so keep that in mind as you think about the recovery in the second half of the quarter You know in the timing of when we'll see that pickup. You know the expected pickup kid in either q4 or q1

Speaker Change: All right, thanks for that. That's helpful. And then on the Forge price feature that you introduced, can you maybe just talk about, you know, what reception has been like from customers to date? And then, Kelly, I think you mentioned that there could be an opportunity for future partnerships. Is there anything you could share there on the nature of those partnerships and what that could look like? Thanks.

Speaker Change: Thank you very much.

Speaker Change: Yes, so this is part of the broader data strategy.

Speaker Change: for FORGE, and I'd say, I'll answer by first saying that we

Speaker Change: for the first time are now announcing some of the data enablement impact including Forge Pro. And I'd say Forge Pro is one piece of that answer in terms of how we see the dimensions of our data strategy.

Speaker Change: Another dimension is obviously where we're charging direct licensing fees for access to our data. And I'd say where FORGE price fits in is in this category that combines derived

Speaker Change: combines direct revenue from our derived pricing, including both our index

Speaker Change: data, and now with ForgePrice.

Speaker Change: are forged single issuer.

Speaker Change: share price data, and we believe that that will be used in a range of different distribution opportunities for us.

Speaker Change: Clearly, forged price is the underlying component of our indices, but it also, on an individual name basis, can be really informative for people buying and selling. So we believe that we'll continue to have both a revenue stream that's around licensing and then revenue streams

Speaker Change: that are around enablement, and I would say Forge Price and Forge Pro are more on the enablement side, and I would say Forge Intelligence, and our Forge Index is more around licensing.

Speaker Change: So put that in the entire context for your question there Patrick

Patrick Moley: Thank you.

Patrick Moley: No, that's very helpful. All right, that's it for me. Thanks, guys.

Speaker Change: Thanks, Patrick. Thanks, Patrick. John, our next question.

John: Your next question comes from the line of Devin Ryan with Citizens JMP. Please go ahead.

Devin Ryan: Hey Kelly, hey Mark, how are you?

Speaker Change: Great. Thanks, Evan.

Speaker Change: I want to ask a question about Forge Pro and just...

Speaker Change: whether there's any data or anecdotes you guys can provide around

Speaker Change: How much more engaged clients are that are using Forge Pro? And then just more broadly, what you're seeing around trends in institutional capital in this space? I'm just curious whether, you know, institutional investors...

Speaker Change: Forge Pro may give them more confidence to participate. So just love to get some data around what you're seeing there. And then whether you're seeing new institutions starting to kind of pop up that you're engaging with and maybe you weren't previously.

Speaker Change: Yeah, so let me let me start out with some anecdotal information. So first of all

Speaker Change: Um...

Speaker Change: We have been seeking feedback for this for the better part of a year, just to understand how to maximize the value and engagement of PRO.

Speaker Change: And if it wasn't clear, we think that there is real value for institutions.

Speaker Change: that look at order management and pricing data in the same place.

Speaker Change: and we believe that will shift.

Speaker Change: and evolve the engagement model for Ford and the Forge and for the entire private market.

Speaker Change: So we're placing a lot on the investment in pro because we think of it as the front end

Speaker Change: for accessing the platform from now and going forward, particularly for institutions. It does now represent a pretty big chunk of enabled revenue at 16%.

Speaker Change: Over time, we expect to report

Speaker Change: more on key metrics around engagement.

Speaker Change: And I'd say we view this last period, and probably the next couple of quarters, as trying to really figure out what is the most relevant way of describing and reporting on the success of that engagement.

Speaker Change: and I'll also comment that I am now doing a series of annual meetings with the top institutions that are either in the space or who are looking to get into the space.

Speaker Change: and in the very last one that I did...

Speaker Change: We had a couple of the biggest hedge funds in the world who were looking at this space.

Speaker Change: and trying to figure out what informs how they're going to play, what their mandate is going to look like in 2025 and beyond. And we're super excited about this. I know this is mostly anecdotal, but we did want to make sure that the street heard about the level of...

Speaker Change: And I did want to go out of the way and I'll repeat it now for everyone to hear, you know, the institutional business is two-thirds of our business.

Speaker Change: And while this has evolved over time, we think of this as part of the future strategy for our global mandate, not just in the U.S., but outside of the U.S. as well.

Mark Lee: Hey Devin and this is Mark. I would just kind of also remind you that we really rolled out Forge Pro at the end of March, early April, so it's early days but the pace of adoption and you know by our client base is really starting to accelerate.

Speaker Change: So we're really pleased about that.

Speaker Change: Thank you. Bye.

Speaker Change: Okay, terrific. And just to follow up on the election results and...

Speaker Change: and obviously a new administration coming in that's kind of a lighter regulatory touch administration.

Speaker Change: I'm just curious, you know, are there any...

Speaker Change: I think that we should be thinking about as potential changes that could occur to your business or how you can engage in the private market or how private market investors engage. The answer might be no, but I'm just curious if there's been anything that...

Speaker Change: The market's been kind of thinking about that could also be affected by a change in administration, particularly one that's going to be a lot wider on regulation.

Speaker Change: Yeah, so we, like everybody else, are waiting to see what comes next. I think the most important part of the answer is...

Speaker Change: We're just really happy that there's certainty and a resolution to that. And so we're taking a breath. And clearly the expectation of a lighter regulatory touch.

Speaker Change: is something that we've concluded might be an outcome for this election.

Speaker Change: And, you know, we've been trying to stay an example for the market around

Speaker Change: safety and soundness as this market evolves. And that includes.

Speaker Change: staying close to regulators. As a public company, as everyone knows, you know, part of the reason we came...

Speaker Change: to being a public company, we felt like that oversight and regulation would give confidence in our ability to lead this market. We view ourselves as the leader. We're going to continue to stay highly engaged and help educate.

Speaker Change: the regulators that come in in this next administration. And I think we're gonna wait and see what happens and just play it as best we can that's in the best interest of the company and the participants here in the private market. But we would welcome.

Speaker Change: You know, any relief that would create more access for the private markets. We think the asset class is really exciting and we'd love to see more participating.

Speaker Change: Amen.

Speaker Change: Yeah, that's great, Kelly. I guess that's what I was getting at. Like, are there areas that...

Speaker Change: potentially there could be relief in terms of opening it up to retirement accounts or other areas that that maybe have been discussed and we don't know where this administration would go but things that are just kind of the hot button points and maybe that's one of them but yeah I'm just curious you know let me just let me just tell you this we have been to Washington pretty consistently over the last

Speaker Change: year-to-year-and-a-half. We've got an effort that's been underway for a while and and I'd say if I would send one message it would be there would be incredible

Speaker Change: support and surprise that there is a bipartisan interest that we have witnessed and been in conversations over the last year that are supportive of more access to this asset class and more access to liquidity.

Speaker Change: And I would say that this is something that we found surprisingly unifying leading up to this resolution of this election.

Speaker Change: And so we're really excited about, you know, going back and visiting and looking to push.

Speaker Change: and Educate.

Speaker Change: the new administration on why it's a good thing for more people to have access to this asset class and why we can make it a safe and sound place for people to invest. And I think we're finding a unifying view of that across both sides of the aisle.

Speaker Change: Okay, terrific. Thanks so much.

Speaker Change: Thanks.

Speaker Change: Your next question comes from the line of Alex Cram with UBS. Please go ahead.

Alex Cram: Yes, hey, hello everyone.

Alex Cram: I think this is for Mark and I think you talked about on the call and the prepared remarks a little bit on the on the cost side but can you maybe just repeat where you are in terms of cost

Alex Cram: Cut realizations and then more importantly where we go from here I think sounds like there were some one-time items, but yeah, if you think about the next few quarters, how do you see the the cost base?

Alex Cram: stepping down over the next few quarters and when do you think most of those initiatives will will have been completed from a run rate perspective? Thank you.

Speaker Change: Yeah, hey Alex. So, kind of going back to the last earnings, all of you recall, Alex, we talked about kind of $11 million.

Alex Cram: Over $11 million in cost cuts that we took against budget and we indicated that roughly two-thirds of those costs

Alex Cram: were against our Q2 run rate. And then we talked specifically, you know, in...

Alex Cram: are prepared remarks about the $1.2 million

Alex Cram: and Partial Quarter Saves.

Speaker Change: Right, you know our actions were taken in early August, so

Alex Cram: We didn't get a full...

Alex Cram: I think if you could kind of take a full quarter, quarterize that number, that would give you kind of a starting point. One of the things that we took care to notice is that we are looking to invest in expanding our technology capabilities offshore, and so that is part of kind of what we...

Alex Cram: And, you know, otherwise our focus is on trying to manage our costs kind of where they are and continue to move toward break even.

Alex Cram: basically kind of through our top-line growth and expansion.

Speaker Change: All right, fair enough and then

Devin Ryan: Maybe second topic, maybe you can give us a little bit of an update on competition and specifically, would love to get Kelly your views on, you know, NASDAQ private markets out there with basically a new platform now. You talked about on this call, the two thirds of your clients that are institutional. I assume some of those

Speaker Change: are always looking for new platforms and obviously pricing, they came in at a pretty attractive...

Speaker Change: level relative to you. So just just wondering, you know...

Alex Cram: if your views on competition have changed at all,

Alex Cram: driven new dialogues with some of your biggest customers.

Alex Cram: or if the market is still big and fragmented enough that you feel like, you know, there's a bright future still ahead here. Thanks.

Speaker Change: Thank you.

Speaker Change: Yeah, look, I feel extremely confident about our position in the market.

Alex Cram: and the recent announcement by MPM.

Alex Cram: is similar to previous announcements we've seen from others entering the market. And we recognize that while there are many competitors out there, some with

Alex Cram: more well-known names than others, and some...

Alex Cram: better capitalized than others.

Alex Cram: there's nobody out there with the decades of build network that we have and so as we as we've witnessed in a lot of other markets you can you can go and build

Alex Cram: The platform, you can build infrastructure and hope that people show up. It's a lot harder to do that than I think most.

Alex Cram: most imagined. So we're going to continue to stay highly focused on our next generation platform. I think what we have today is a commanding lead on participants.

Alex Cram: in the space.

Alex Cram: When I talked about those 20,000 institutions and the hundreds of thousands of accredited investors,

Alex Cram: It will take a long time for someone to amass that, even if they build technology in a platform, and even if they offer attractive pricing. Because for that to actually be realized, you have to have buyers and sellers.

Alex Cram: that are matchable and that know you and trust you. I think the combination of scale and reputation...

Alex Cram: is very hard to overcome from a standstill position. And I think some of the competitors that are emerging come from completely different parts of the business. So I think we're going to see continued competition. We welcome it.

Alex Cram: And I'd say, you know, the market pricing dynamics that exist in the market is something that we pay a lot of attention to.

Alex Cram: I'd say we are in a position

Alex Cram: to continue to recognize where trades happen and what people are willing to pay. And I think some of Mark's comments on take rate, particularly as it relates to institutional scale, give you an example of where people are trading, and it really validates the private market.

Alex Cram: and Rose Tam for everybody to have new participants.

Alex Cram: come into it.

Alex Cram: So I respect everybody that's out there trying to build this business and evolve it.

Alex Cram: I don't think the competitive landscape has materially changed. In fact, if anything,

Alex Cram: I'd say the current fundraising environment in the private markets, particularly for smaller companies, smaller competitors, is really difficult right now.

Alex Cram: and so I'd say you know we're going to continue to watch it.

Alex Cram: And obviously, we welcome competition, but I'm pretty confident with where we are. And I'd say, stay tuned.

Alex Cram: And we're going to talk more openly in the press about what we're building in terms of the next generation platform. On this call, we talked about ForgePrice, we talked about ForgePro.

Alex Cram: We talked about data enablement and asset management enablement through these fund structures. Continue to watch that because we think that's going to be a couple of the major areas for increasing traction and competitive advantage in the next year or two.

Alex Cram: I'd say the building of a basic platform that matches people, I'm not concerned about that.

Mark Lee: Hey Alex, this is Mark. I would add to Kelly's comments a couple of things.

Alex Cram: I mean, as you know, kind of institutions will trade where there's depth of liquidity.

Alex Cram: Right, and so I do think as Kelly pointed out, I mean with our

Alex Cram: experience our Book of Customers.

Alex Cram: It's hard to kind of catch up to the depth of our limit order book, right?

Alex Cram: and others will try. I think others have talked about trading...

Alex Cram: 25 names in the private markets. We've traded 142 names kind of over the last 12 months. I also, as you've heard, right, we have the Forge Pro product. We have an index. We have Forge Price. We have the custodian.

Alex Cram: And when you just think about, we have the RIA with over, you know, with roughly a hundred, you know, fund vehicles through which people can access, you know, hard to get company names and through which we can invest, you know, capital into companies.

Alex Cram: either on a primary or secondary basis. So I think those are kind of just...

Alex Cram: You're aware of all these things, you know, there's a wide range of products and services

Alex Cram: that we've built that competitors will have a hard time kind of catching up to. And then finally, you know, we've never thought that there's just going to be a winner-take-all scenario. We've always thought that there's going to be, you know, one or two or three players in this market. In the long run, there will be consolidation. You know, so I think that's still kind of how we think about it.

Speaker Change: Excellent. I appreciate all the thoughts.

Alex Cram: Thank you, Alex.

Speaker Change: Your next question comes from the line of Olin Thao with Oppenheimer. Please go ahead.

Speaker Change: Hey guys, this is Guru on for Owen and thank you so much for taking my question.

Alex Cram: Revenue from Europe kind of started picking up in 2Q. So how has the activity been this quarter? Has some of that momentum carried over into 3Q? And I believe as of 2Q, Forge is still operating under an umbrella license in parts of Europe, I think UK and Germany.

Alex Cram: Are there any updates over there in terms of the BAFN license approval process? Thanks.

Alex Cram: So we have continued to evolve.

Alex Cram: And I'd say we are very happy with where we are.

Alex Cram: given our license status now. I think our choice and our view is that the Bothan license is something we're going to defer for a while.

Alex Cram: and we've figured out that

Alex Cram: Activity in both the UK and Germany is moving at a pace that we're really happy with.

Alex Cram: I think we'll be prepared to talk more about that in our next update.

Alex Cram: But we have had one of our senior leaders relocate.

Alex Cram: to London.

Alex Cram: and really are trying to use this next period to ensure that we're balancing and ensuring that the access to participants in the European and UK markets are well balanced with some of the supply and demand that we've got in the U.S. market.

Alex Cram: We are seeing some of that traction evolve, but I'll let I'll let Mark take it take it from here

Mark Lee: Yeah, I mean it's essentially Guru and as Kelly said we are doing trading

Alex Cram: Thank you.

Alex Cram: So that's where we are as far as how we're going to continue to operate in Forge Europe for the future.

Alex Cram: for the near future. As far as the first part of your question with regard to...

Alex Cram: The momentum we saw in Q2 and then kind of going into Q3, I think what we were saying earlier was

Alex Cram: in particular, the institutional investors.

Alex Cram: are off at times in July and August, and then they come back to the desk in September. So that typical seasonality did play out this year, and I think it was also exacerbated by the upcoming election uncertainty, right? And so now that the election is over and that overhang, I think, is really important.

Speaker Change: Thank you.

Alex Cram: We kind of are looking forward to, you know, the rest of Q4, hopefully picking up as that uncertainty has been removed from the market.

Alex Cram: Thank you. Thank you.

Speaker Change: Got it. That's super helpful. Thanks.

Speaker Change: Your next question comes from the line of Ken Worthington with J.P. Morgan. Please go ahead.

Speaker Change: Hi team, this is Madeline DeLayden on for Ken. Thanks for taking our question. You mentioned the declining fee rate this quarter due to the higher mix of volumes towards the more popular names on your platform. So we're wondering if there's any sort of concentration metric you can share of what percentage of volumes these popular names or private MAG7 type names made up in 3Q? And similarly, would you contribute the three or low bid ask to this sort of mixed dynamic as well? Thanks so much.

Speaker Change: Yeah, so your question is about the impact of concentration on the lower take rate in...

Speaker Change: 2025, right?

Speaker Change: Yes, 24 or any color you can provide going forward would be appreciated.

Speaker Change: Yeah, so Maddie, I think as Kelly talked about, this has been a year where when you look at the valuation metrics, and this is in our FIO and our PMU,

Speaker Change: numbers. There's been a lot of, you could think of it as a dichotomy between

Speaker Change: kind of the companies doing really well that once they're able to go to market, raise capital, that are trading up, you know, and those companies that are still struggling. I think we have said in the last PMU that the companies that we track and have forged price

Speaker Change: 54% of those haven't had a funding round since 2021 or earlier so the world is really right now kind of split into

Speaker Change: you know, those companies that are still trying to...

Speaker Change: You know get through

Speaker Change: get through kind of what's happened in the last couple of years and those that are really thriving. So, you know, we are seeing a lot of activity, a lot of interest in the AI names and other companies doing very, very well. You know, and that's bringing back the institutional trader. They're trading inside and that's contributing.

Speaker Change: We don't currently expose or report specific data with regard to what you're asking, but it's something we'll consider to try to be able to give you more information in the future.

Speaker Change: you know the only thing I'd add because I just did some press on this

Speaker Change: is the mag seven...

Speaker Change: makes up 25% of the valuation of the entire private market.

Speaker Change: And so these are names that trade on Forge and that a lot of people are interested in.

Speaker Change: So you're going to naturally see some concentration when you're looking at

Speaker Change: The size of companies in here, you're looking at companies ranging from, you know, 30, 40 billion

Speaker Change: to over 200 billion for SpaceX. So there's naturally going to be some concentration.

Speaker Change: in between 140 and 150 unique names in the last 12 months.

Speaker Change: and so the range and breadth of trading is quite broad here.

Speaker Change: But it's no different than the public markets where you're going to have a lot of concentration.

Speaker Change: and the very biggest...

Speaker Change: and most sought-after names there, too. So, I think if we decide to start reporting on volumes, we'll get further into it. But certainly, within the MAG-7 and within the FORGE,

Speaker Change: private market index names, the top 75, you're going to definitely see some concentration.

Speaker Change: Hey Maddie, I would add one last comment. I mean when Kelly and I joined FORGE back in 2018

Speaker Change: I mean, there was very high concentration.

Speaker Change: and Uber and Airbnb. Probably four names, yeah. You know, we're a huge part of the market back then.

Speaker Change: And as the market expanded, you know, and grew out, that concentration went down. But I think...

Speaker Change: Concentration kind of goes through peaks and valleys.

Speaker Change: For example, a big name can go public when Uber went public.

Speaker Change: and Airbnb went public, you know, all of a sudden, kind of those names disappeared, you know, from our platform as a whole.

Speaker Change: as

Speaker Change: We no longer traded them as public companies, but then...

Speaker Change: you know, other companies kind of rose to take their place, right? And so I think over the years that we've been here now, it's like coming up on six years for, over six years for both of us, we've seen that concentration kind of be high, you know, come down, you know, increase back up again. So I do think it's not a...

Speaker Change: kind of static situation.

Speaker Change: Understood. Thanks for the context and the color.

Speaker Change: Thank you, Maddie.

Speaker Change: If there are no further questions...

Speaker Change: Sorry, if there are no further questions at this time, I would like to turn the conference back over to Mr. Dominic Paschel for any closing remarks.

Dominic Paschel: No, great. We appreciate you guys joining us on the day after the election. There's a lot going on. I look forward to visiting you both on the East Coast and the West Coast before the New Year. Thank you, John.

Speaker Change: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: [music]