Q4 2024 Forge Global Holdings Inc Earnings Call
Good afternoon, my name is Jail, and I'll be conference operty today.
At this time, I would like to welcome everyone to the 4th quarter and fiscal 2024 Financial Results Conference call.
On today's forward global call will be Kelly Rodriques
CEO .
James Levin, CFO
Lindsay Riddell: Mark Lee, Chief of Strategic Wealth Solutions, Lindsay Riddell, Executive Vice President of Corporate Marketing and Communications, and Dominic Paschel, SVP of Finance and Investor Relations.
Lindsay Riddell: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speakers are marked, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. And now I would like to turn the call over to Lindsay Riddell. Miss Riddell, you may begin your conference. And now I would like to ask a question during the conference.
Speaker Change: Thank you, Jail, and thank you all for joining us today for for just fourth quarter and full year 2024 earnings call This call will be a bit longer as we recap the full year
Speaker Change: Joining me today from forward are Kelly Rodriques, CEO , James Nevin, forges new CFO , Mark Lee, CFO Emeritus, and Chief of Strategic Wealth Solutions, and Dominic Paschel, S.B.P. Finance and I.R.
Speaker Change: Just after market closed today, we issued a press release announcing four to fourth quarter and full year 2024 financial results. A discussion of our results today complements the press release which is available on our investor relations page.
Speaker Change: This conference call is being webcast and in a change from prior quarters we will show slides during this presentation.
Speaker Change: The replay of the webcast, as well as the slides, will be available via the IR page of our website shortly after the conclusion of this call.
Speaker Change: We will also post to that page our prepare remarks and investor supplemental document which consolidates some relevant metrics.
Speaker Change: 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 may are subject to various risks and uncertainties, and there are important factors that could cause these actual outcomes to materially defer from those included in these statements.
Speaker Change: We discuss these factors in our SEC filings, including our annual report on Form 10K, which will be found on the IRPage of our website after it is filed.
Speaker Change: As a reminder, we are not required to update our forward-looking statements [inaudible]
Speaker Change: In our presentation today, unless otherwise noted, we will be discussing adjusted financial measures, which are non-GAAT measures that we believe are meaningful when evaluating the company's performance.
Speaker Change: 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.
Speaker Change: Today's discussion will focus on the fourth quarter and full year 2024 results. As always, we encourage you to evaluate both annual and quarterly results for a full picture of forges performance, which can be affected by unexpected events that are outside of our control.
With that, I'll turn it over to Kelly, our CEO .
Kelly: Thank you, Lindsay and Dom. Good afternoon everyone and thank you for joining us today.
Kelly: We closed out 2024 with 13% year-over-year revenue growth and a strong pipeline.
Kelly: Despite a muted fourth quarter stymied by the presidential election cycle, our year-over-year revenue improvement included a 46% increase in marketplace revenue, which grew to 37 million.
Kelly: As Q4 came in near even to Q3, I'm happy to report we've observed improving overall market dynamics and growing deal activity aided by the technology improvements we deliver to support our leading marketplace.
Kelly: We are encouraged by signs of a strong start to the year, which we believe both well for a more active 2025 market.
Kelly: These include a relatively low bid-asks spread and improving valuations as reported in our February 4th private market update.
Kelly: The Ford's private market index is up 33% over the prior three months as of the end of February , outpacing major indices like NASDAQ and the S&P 500.
Kelly: In February , the index experienced its largest single-day gain in its history, jumping 20% mostly driven by bigger AIs, 850% price increase.
Kelly: Other index names have been outsizable tender offers, including Stripe, which saw evaluation improvement of 31% with its funding news.
Kelly: This demonstrates that the rally we're observing may be broadening beyond the AI sector, which has driven the bulk of momentum over the past several months.
Meanwhile, the IPO pipeline is expanding.
Kelly: With 13 IPO filings of planned raises of 100 million or more in January , which is the highest monthly total of filings of this size in three years and evidence that some of the high demand companies, like Core Weave, may be the first this year to test the waters.
Kelly: As we've discussed, IPO activity often generates increased platform activity in the private market as investors gain confidence that exits are a near term possibility.
While these are all encouraging signs,
Kelly: We're conscious that we still haven't seen the IPO floodgates open.
Kelly: and the political environment and concerns about the impact of tariffs and other economic and foreign policy matters have the potential to drag enthusiasm.
Kelly: From where we sit, with three weeks to go and Q1, our pipeline currently stands at its highest level in almost three years. And with that,
Kelly: We expect the marketplace revenue for Q1 will meet or exceed our best quarter in 2024, which gives us optimism heading in the Q2.
Kelly: While anticipating a more robust market recovery, we've stayed focused on the step changes required to push this market forward, including achieving a fully automated trading experience.
Kelly: exposing more data transparency and enabling the creation of new financial products to drive more access and liquidity into the private market.
All built on the Forge Next Generation platform.
Kelly: and we've done this while diligently managing costs as we drive toward our commitment of achieving profitability in 2026.
Kelly: Now, reflecting on our accomplishments in 2024, we're proud of the technology and pricing innovations we delivered to the market to date.
Kelly: Are Ford's price, pricing standard, is enjoying broader acceptance among private market participants?
as well as data distributors and media publishers.
who rely on Ford's price.
to better understand performance, track trends, and make investment decisions.
Kelly: We're proud that in 2024 we were first to market with standard setting indices, the Ford's private market index and the Ford's liquidity private market index.
Kelly: that are the foundations on which new financial products the drive access to the private market are being built.
Kelly: and we're proud of the technology innovation our team continues to deliver including Forge Pro which delivers the advanced institutional trading capabilities to 400 of our sophisticated investor clients to allow them to fully participate in this market.
Kelly: We're encouraged that as the market continues to evolve, we've been able to capture supply from a greater diversity of sources.
Kelly: giving us access to a broad range of deal flow through various investment vehicles.
Kelly: This includes singular holdings, sizable block trades, third party funds, and our marketing and data-driven sources. Plus,
Our Investment Funds, Managed by Fords Global Advisors
Kelly: Where we now have close to 100 funds, with just under 1 billion of AUM.
Kelly: We believe our progress in delivering technology, driving data transparency, and enabling financial product innovation, as well as our role as a central nervous system for the private market.
is driving the asset class toward a tipping point.
Kelly: and we're looking forward to what we will deliver this year to meet the moment.
Kelly: I'll turn it over to our CFO James Nevin to talk about the fourth quarter and annual financials in more detail.
But before, I handed to James [inaudible]
Speaker Change: I'd like to state how grateful I am for Mark Lee's contribution to Forge over the last six years and for his steady and diligent leadership Mark continues to be an incredible resource to James as we undergo this transition.
Speaker Change: Both Mark and James are here today and we'll be taking questions with me during Q&A.
Now to James.
Thanks, guys.
James Nevin: It's an exciting time to be joining Forge from the London Stock Exchange Group and I'm honestly part of a transformational moment for both Forge's future and for the private market.
James Nevin: I've been here less than two months but I'm excited about the potential we have as we execute against our strategy and long-term vision.
Speaker Change: I first want to discuss the key messages coming from the Q4 results and the Outlook coming into 25.
Speaker Change: Q4 marketplace revenues came in at the bottom end of our expected range. The uncertainty we saw in the run-up to the US presidential election subsided toward the end of Q4, and as Kelly said, we entered 2025 with a strong deal pipeline, which is continued to grow through the first quarter.
Speaker Change: As expected, custodial cash administration fees were affected by the numerous federal rate cuts we experienced in 24 and even though the speed of cuts in 25 could be slower than we expected, we will experience the full impact of the November and December cuts in the first quarter.
Speaker Change: We fully execute it against the cost savings we announced in August last year.
Speaker Change: and Cost Focus remains key as we enter 25, whilst balancing selective investment into our key strategic initiatives, including continuing to roll out enhancements to our next generation platform, as Kelly discussed.
Speaker Change: Turning to the detailed results for the fourth quarter of 2024, Ford's total revenue less transaction-based expenses were 18.3 million as compared to 19.1 million in the last quarter.
[inaudible]
Speaker Change: Revenues were affected by a number of factors, including uncertainty leading into the US presidential action as well as the pace of fed interest rate reductions.
Speaker Change: This contributed to an uncharacteriously soft fourth quarter in our marketplace business.
Speaker Change: Total market based revenue was approximately flat at 8.6 million in the current quarter compared to 8.7 million in the
Speaker Change: Revenues are driven by a decrease in transaction volume to $299 million from $338 million in the 2.8 cents from 2.6 cents in the prior quarter.
Speaker Change: The impact of these factors on the quarter-over-quarter market-based revenues are shown in the waterfall graph on the top right of the slide.
Speaker Change: Total custodial administration fees were 10 million in the current quarter compared to 10.5 million in the prior quarter. The decline was largely driven by lower cash administration fees.
Speaker Change: Our custodial cash administration free derates was affected by the numerous federal rate cuts during and preceding key four, which had a negative effect on our revenues, as you can see in the waterfall graph on the bottom right of the slide.
Speaker Change: And as I mentioned before, the full impact of these rate cuts will continue to affect our revenues in this area of the business as we go into 2025.
Speaker Change: Archaeostodial cash balance is totaled 483 million at the end of Q4, as compared to 470 million at the end of Q3, and modest increase of 3%.
Speaker Change: As of the end of Q4, total cost accounts increase 4% from 2.3 million in the prior quarter to 2.4 million and assets on the cost increase 2% from 16.6 billion to 16.9 billion, both driven by our cost is a service business offerings.
Speaker Change: A fourth quarter upper and expenses decreased 3 million to 37 million, from third quarter expenses of 40 million.
Speaker Change: We continue to realise the 11.3 million cost savings we announced in August 2024. As a reminder, we expected two-thirds of these savings to come from run rate operating spenders and one-third from future cost avoidance.
Speaker Change: Looking at the waterfall charts on the bottom right of the slides [inaudible]
Speaker Change: The additional 0.6 million of run rate impact in the quarter brings the total quarterly run rate savings to 1.8 million or 7.2 million on an annualized basis.
Speaker Change: In addition, we took action before the end of 24, which will result in a further 1 million of annualized cost savings.
Speaker Change: When combined with a 3.8 million costs, we removed it from our operating plan. This has resulted in total cost savings of 11.9 million and an overachievement against our original stated goal.
Speaker Change: While the cost of achieving these savings was lower quarter over quarter, included in the 0.7 million net amounts, you can see on the slide, is 1.9 million of costs recognized in the fourth quarter, which relates to severance cost and a non cash lease impairments as we reduced our office footprint.
Speaker Change: We are selectively continuing to invest in our people and our technology and will continue to do so through 2025.
Speaker Change: We have started to utilize offshore locations for technology and other functions with some temporary increases in cost as we run parallel across locations to ensure operational stability.
Speaker Change: These are the major contributors to the 0.8 million cost increase shown on the charts.
Speaker Change: Non-cash items include the impact of changes in share-based compensation and appreciation, both of which we expect continues to slowly decline in 25.
Speaker Change: A 16 million fourth quarter net loss decreased from the 18.8 million net loss in the third quarter.
Speaker Change: Low operating expenses and higher other income, primarily due to more favorable reductions in the fair value of warrant liabilities, were partially offset by lower revenue net of transaction-based expenses.
Speaker Change: Adjust the EBITDA is a key measure of our operating results as it generally aligns more closely with our operating cash burn. In the fourth quarter, adjust the EBITDA loss was 10.9 million compared to a loss of 11.4 million loss quarter.
Speaker Change: Net cash using operating activities was $7.9 million in the current court's quarter, compared to $5.8 million last quarter.
This increases primarily driven by working capital movements.
Speaker Change: Cash, Cash Equivalence, and Restricted Cash, ended the quarter at 106.3 million, compared to 115.6 million last quarter. As Forge continues to maintain a strong balance sheet.
Speaker Change: Given this strength of balance sheet and our confidence in the execution of our strategic goals which support our path to profitability, we are also announcing today that the board has authorized this stock buyback program of up to $10 million .
Speaker Change: This reflects our belief that forged stock is currently significantly undervalued.
Speaker Change: and opportunistically buying back stock therefore represents a compelling opportunity the company to increase
Now to recap our strong, full-year results for 2024.
Speaker Change: Forge's total revenue less transaction-based expenses was 78.7 million, and 9.3 million or 13% improvements from the 69.4 million a year ago.
Speaker Change: During 2024, we saw a significant change in the mix of our revenue as marketplace revenues improved and custodial administration fees were down year of the year.
Speaker Change: Marketplace Revenue used total 37.5 million, up 46% from 25.8 million in 2023.
Speaker Change: 234 trading volume was up 73% to 1.3 billion compared to 766 million in 2023 and the average net take rate for 24 was 2.8 million compared to 3.3 million in 23.
Speaker Change: As Kelly articulated, we have made considerable progress diversifying our sources of liquidity on both the buy and the sell side.
Speaker Change: We now have access to a breadth of liquidity that other market participants do not, including sizeable block trades, access to our own and third-party SBVs.
Issure Relationships, Institutional Asset Management Relationships
Mark Singh, Driven Volume, and Dated Driven Volume.
Speaker Change: This mix is increasing our volumes in absolute terms and increasing the stickiness and quality of liquidity flows.
Speaker Change: are pricing varies for accessing these different liquidity pools and as such we continue to see variability in our net take rates. We expect increases in volume to continue to our way any declines and averaged net take rates over time.
Speaker Change: The absolute revenue effect of these volume and net tape rate factors is shown in the chart on the top right of the slide combined with the positive effect we saw in the year across other contributing marketplace revenue drivers, including data and our investment management business for global advisors. Thank you.
Speaker Change: Heading into 2025, we are continuing to see the benefits of these diverse, diverse vital liquidity sources and contributing marketplace revenue pools, such as the Q1 marketplace revenues are performing in line with our expectations of a post-election recovery in investor sentiment.
Speaker Change: However, having reviewed street averages, revenues of the full year 2025 exceed our current expectations.
Speaker Change: Total Cost Organal Administration fees for 41.8 million in 24 compared to 44 million in 23.
Speaker Change: Cash administration fees, the larger components of custodial administration fees are highly correlated to custodial cash balances and the level of interest rates.
Speaker Change: You can see the year-ever year impacts on the warful charts on the bottom rights.
Speaker Change: The impacts of the decline in average custodial cash balances to 478 million in 24 from 556 million in 2023 was partially offsets by higher rates in 24
Speaker Change: The Federal Reserve reduced interest rates by taking 100 million basic points over the course of 24 as compared to an increase of 100 basic points over the course of 23.
Speaker Change: Castillo cash balances were 483 million in the end of 24 compared to 505 million at the end of 23.
In 2035, we expect to generate lower cash administration fees [inaudible]
Speaker Change: A total custody accounts increased 14% year-over-year to 2.4 million from 1.2.1 million.
Speaker Change: The growth and accounts came from our cast or cast that cost is a service business which have lower account fees.
Speaker Change: However, we saw less revenue generating activity in 24 from our core self-directed IR accounts
Speaker Change: which lets the 0.9 million decline you can see in the bottom right of the slide.
Speaker Change: Asset on the costee ended 2024 up 8% year of the year to 16.9 billion from 15.6 billion at the end of 23
Operating expenses were poorly flat here at the A.
Speaker Change: As you can see in the graph, are any across to achieve or announce cost savings exceeded the savings realised in the period?
Speaker Change: However, as I said earlier, we ended the year on track to realise 8.2 million in annualised run rate cost savings.
Speaker Change: We have a number of items in our cost base, which are linked to revenue growth and these grew by 4 million but were offset by other positive year on your savings of 1.3 million and positive movement in non cash items of 4.1 million.
Speaker Change: A full year net loss was 67.8 million in 24, an improvement of 23.7 million from the net loss of 91.5 million last year.
Speaker Change: The lower loss was attributable to 9.3 million higher revenue and 15.9 million in higher other income due to favorable reductions in the fair value of warrant liabilities
Speaker Change: Our fiscal year 2024 adjusted EBITDA loss was 43.7 million compared to an adjusted EBITDA loss of 48.8 million in 2023.
Speaker Change: The improvement in just the EBITDA loss is in line with a lower 2024 net loss adjusted for non-cash items.
Speaker Change: Netcash using operating activities was 40.5 million in the air, basically flat compared to the netcash using operating activities of 41.5 million in 2023.
Speaker Change: 2024 included one-time cash payments of 4.3 million in connection with the resolution of legacy
Speaker Change: As of December 31, 2024, our total employee count sits at 300, down from the 331 on December 31, 2023.
Speaker Change: This headcount excludes contractors, including a growing number located offshore, which augments our technology capabilities in a cost-effective manner.
Speaker Change: From a housekeeping perspective, our weighted average basic number of shares used to compute net loss was 186 million shares and our fully diluted outstanding share counts as of December 31st was 201 million shares
Speaker Change: For Q1, we estimate 187 million weighted average basic common shares for EPS modeling purposes in a lost position.
Speaker Change: Having reviewed our medium-term plans in my first couple months of forge with a strengthening private market investor sentiment and a strong and growing pipeline in the first few months of 2025, we remain confident in our target of reaching adjusted EBITDA break even in 2036.
Speaker Change: I plan to provide more detailed guidance on half of this goal in the coming quarters.
Speaker Change: I'll hand it back to Kelly before we go to questions.
patient
Speaker Change: As we look forward, we're focused on making progress sort of fully automated trading experience.
Speaker Change: Exposing more data to drive market adoption and enabling new financial products that will deliver greater access and liquidity into this market.
All while diligently managing our costs.
Speaker Change: We are confident in our strategy and in our vision for the future and our optimistic about an accelerated pace of market momentum in 2025.
Speaker Change: Thank you for joining us and we'll open up questions.
Speaker Change: Thank you. The floor is now open. Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw, you're working simply press star one again.
Speaker Change: If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Your first question comes from the line of Patrick Moley of Piper Sandler. Your line is open.
Yes, good evening. Thanks for making the question.
Patrick Molle: So I had one Kelly on the fully automated trading capabilities you're building out just wondering if you could maybe elaborate on the go-to market strategy there and in terms of just you know conversations that you had with customers where do you see you know this demand coming from is it you know mostly asset managers is it trading firms any color there thanks.
Patrick Molle: Yeah, thank you. Great to hear from you, Patrick. This has really been the centerpiece.
of our next generation platform vision for three years.
Patrick Molle: and let me just say that we've spent two years, two and a half years almost.
Patrick Molle: of Investment in the foundational platform that will allow us to build some of the really important market-facing capabilities that will be viewed and felt by the market.
Patrick Molle: Ford's Pro was sort of the big breakout release last year and so this fully automated experience is something that we believe will serve every part of the market.
Patrick Molle: It's unequivocal to us at the market for private shares. This asset class has had
Patrick Molle: A need for standardization and a need for automation, and this is really part of the focus and the vision so we're really excited about I guess what I would say is [inaudible]
Speaker Change: I'm making this really clear right now in Q1 of 2025 and more details will be announced.
Speaker Change: As we move through the year about when this will be realized, but we've mentioned it a couple of times as the first time we've mentioned it this directly. And so I think it will I think it will cut across our entire customer base.
Speaker Change: Patrick Taylor, and then just follow up for me. Robin Hood CEO recently wrote an opinion piece in the Washington Post about the opportunity to democratize access to private markets.
Speaker Change: or private companies through the use of blockchain. So just wondering if you've read it, just your thoughts on this, and are there any potential opportunities out there to strike strategic partnerships with retail broker firms for Forge? Thanks.
Speaker Change: Yes, you know, my take and I read the piece and we were both at a conference yesterday. Literally got a chance to speak to him, coming up the podium. This is part of our vision as well. When I saw that, what I saw was in commenting on...
Speaker Change: Certain elements of future-based settlement technology we thought about blockchain tech as being a critical core to how markets will evolve, not just private markets and not just crypto markets.
Speaker Change: So I fully applauded the piece. I thought it was great. And I guess part of what our vision for what we're building here.
is an extensible platform that can integrate
Speaker Change: into any modern infrastructure that would provide distribution to interested participants in the private market.
whether it be a Robin Hood. [inaudible]
Application
Speaker Change: or any sort of investment platform that can integrate with a modern API to include private participation in private markets. So that's completely compatible with our future strategy. We're very excited to hear and see that piece.
Speaker Change: Yeah, very, very exciting stuff. Thanks guys, that's it for me.
Thanks, Patrick Nick.
Speaker Change: Your next question comes from line of Devin Ryan of citizens. Your line is open.
Devin Ryan: Great. I have one. I feel like we just did this, but good to catch up again, Kelly and James Welcome and Mark congrats on the new role. I do want to talk about the SBV kind of phenomenon because I know that scenario that
Devin Ryan: You know, hopefully it's going to drive more liquidity into the fight on markets and just make
Devin Ryan: Turnover, I think easier and kind of remove some of the friction. So just love to get a sense of kind of the evolution that you guys are seeing in terms of how SPVs are being utilized. And if you give any sense of kind of where we are today relative to the last cycle and maybe 2021 peak, like how many more are on the platform. There's like an AUM number and then give context of how important this is going to be to drive.
and more liquidity into the markets. Thanks.
Devin Ryan: Good to hear from you again, Devin. And thanks for yesterday. We, um,
Devin Ryan: We have seen this coming for a while. If I go back to 2018, this was really the emergence for us.
Devin Ryan: of the SPV phenomenon in the market space. Now, I think one of the comments that we wanted to be really clear about, and I'm going to come back to the SPV specifically, is part of what we are doing here at Forge is dealing with a diverse set of investment vehicles.
Devin Ryan: and it's really the sum of the parts that's the story here. It's our access to directs.
Devin Ryan: It's these SPB structures and what we believe is going to be essentially a future where [inaudible]
Devin Ryan: Part of what you'll see from forwards is the expansion, the rapid expansion of these SPV structures, not just to hold single names.
because up until now...
Devin Ryan: We have primarily held single names within these FPV structures to help with the reduction of friction.
Devin Ryan: as these positions turn over over time. This was a huge part of our of our Airbnb business back in 2018 and 2019 before they went public. And we see this expanding into multi-name SPVs.
Devin Ryan: and I mentioned at the conference yesterday that one of our partners, Equidity,
Just announced the launch of a 40-act fund
Devin Ryan: and Matt Fortiac Fund will be powered by the Forge Private Market Index and this is another example of just the fun structure that will drive liquidity and expand access in this business to get to your question specifically.
Devin Ryan: We probably had three or four hundred million dollars of AUM in these SPVs a couple of years ago and now we're at about a billion.
Devin Ryan: And this is an area of real focus for us. And we think that when you start getting into baskets.
Devin Ryan: and more than just single-name SPBs. It will be attractive to those who want to diversify and hold a range of positions in a single investment. And it will obviously continue to provide liquidity.
Devin Ryan: and right now, if we've got a hundred of them, you know, I won't make any prediction or forecast, but we want a lot more. This is a big part of our emphasis going forward. So thank you for that question.
Yeah.
Speaker Change: Yeah, thanks, Kelly. Yeah, it seems like an area that could just remove some of the friction that exists in the private markets. So
Speaker Change: Kind of a pretty volatile start, you know, just with the macro uncertainty and tariffs and, you know, equity capital markets are actually tracking down a bit year-to-year. But at the same time, there is optimism around the IPO market, and, you know, there's a pretty wide range of expectations out there around what 2025 will look like in terms of...
Speaker Change: just capital markets more broadly. So, I'm just curious, you know, heard the outlet commentary around kind of the revenue expectations and appreciate that it's hard to predict, you know, the full year based on, you know, two months of where we are right now. But what do you guys kind of baking into your view in terms of the kind of the pace of recovery? My sense is you're probably not expecting kind of a coil spring snapback and IPOs and just that'll trickle into the private market, but kind of more of a slower, you know, grind up. But I'm just curious, kind of-
Speaker Change: in your expectations of just even the framing in the prepared remarks, kind of how you guys are thinking about 2025 in terms of how it progresses or at least for budgeting purposes. Thanks.
Speaker Change: Yeah, so I'll just give you some sentiments and I'll let James weigh in here so we see signals in the data. [inaudible]
that are indicating...
A steady momentum in the year.
Speaker Change: We're not expecting a massive recovery and IPO start rushing.
Speaker Change: But we are expecting improved an improved environment. I'd say we're also watching like everybody else.
the broader macroeconomic situation. For example, with the tariffs...
Speaker Change: You know, is this going to continue? Is this going to settle down? I'd say so far, at least in the private markets,
Speaker Change: and the discussion about IPOs in 25 has not been negatively affected.
Speaker Change: and I'm going to be talking about the new new new new new new new new new new new new new
Speaker Change: And, you know, some of the funding has been up. The Q4 funding, for example, was up 25 billion. And so there are correlations that we're seeing around funding and IPOs. And so if that improves steadily, it doesn't require the floodgate to blow open.
Speaker Change: We think we're going to see a year that's got Mark's improvement and so we're pretty excited about it, pretty optimistic about it.
Speaker Change: Game, do you want to add anything? Yeah, I think they think they want to add stats.
Speaker Change: and Kelly talked about some of those leading indicators which were…
Speaker Change: Clearly feeding into our thoughts on both Q1 and the full year from a market perspective.
Speaker Change: and as Kelly said in his comments, we're expecting key ones to come in for marketplace ahead of our best quarter last year. And that improvements gives us confidence going to key soon beyond.
Speaker Change: I think the one element I also add, which I discussed in the comments earlier, is around our custodial cash administration fees which are clearly correlated to the interest rates and even though the rate environment probably is.
Speaker Change: at the whole better than it might have been when we thought coming into the year. We're still going to see the impact of where we're out to post the 100 basic points of cuts last year, so I'll flow into that half of our business too.
Devin Ryan: Okay, let me make one quick clarification. There were a couple of things. Go ahead, Devin. Let me let you finish.
[inaudible]
Devin Ryan: Yeah, more if it's related, but I wanted to dig in because I think the
Devin Ryan: The peace on the IPOs, because there's obviously, I agree, the data, at least your date hasn't been great at the same time, all the weaving indicators are there, the headlines are there, and I think there's a strong...
Devin Ryan: Demand for companies to go in the public markets. And so we'll see how this all plays out from a timing perspective. But to the extent there is that scenario where the floodgates do start to open kind of in May June of this year.
Speaker Change: You know, get really precise around the timing, but at the same time, the IPM markets are incredibly depressed and they won't be better than they are today at some point. So I think we're all trying to wrestle with exactly when it happens, and that's going to affect you guys, but try and understand if it, yeah, hypothetically does happen this year, when would that show up in your results?
Speaker Change: So it'll show up in our results specifically in the names that announce.
Speaker Change: To be clear, one of the things that we've seen is in an environment where there are IPOs that corresponds to more volume and force, but if you double-click down into it, it's really clear to me that if I mentioned poor weave in the comments, you know, we will see interest.
in a name that fights.
Speaker Change: and the question is, will we see interest, will multiple companies file because that will have meaningful impact and it's fairly correlated. It happens when a company is three to six months from going out, it starts to pick up.
Speaker Change: Don't need to go public to raise capital. So the irony of the improving environment in some ways is that in certain sectors, they're raising money at the level of valuation which doesn't require it.
If you'll look at...
Space Section and Open AI, they've been able to…
Speaker Change: to really access capital evaluations that are attracted to them in the private market. Now, Core Weave is the biggest name, and it's also a pretty attractive sector. So, that's the one that I think people are watching. But I will say, I think it's a little...
It's a little...
Speaker Change: Free mature to see one company come out to have a meaningful impact for fours. We need to see some steady, reasonable stream for it to materially shift the trajectory. But I'd say watch and listen for future comments as we as we round out Q1. And I think that James gets.
Speaker Change: His feet underneath them here. We intend to deliver clearer messaging also around our path to profitability. And I want to make that really clear to the audience here as well.
Okay, excellent. Thanks so much, guys.
Speaker Change: Your next question comes from the line of Ken Worthington of JP Morgan. Your line is open.
Speaker Change: Hi, good afternoon, guys. Thanks for taking my questions. This is Michael Cho, and for Ken today. I just want to just continue on the conversation around outlook and I recognize there's some uncertainty, but good data points as you suggested, Kelly.
Speaker Change: If I'm just thinking through either 1st quarter or 2025 or even exiting 4Q, can you just talk there and give some color in any recent movements in terms of
Speaker Change: The mix of clients or trade type, just given the positive data points. And what I'm really just trying to get at is, I'm just trying to understand.
Speaker Change: You know, the data is improving, the volume seems to suggest more improvement from here. I'm just also trying to understand how tape rates could be impacted if we potentially get more engagement from institutional finds and maybe even more SBB activity ahead.
Speaker Change: Okay, I'm going to actually let James answer this question but I want to make one or two foot clarifications.
One in James' comments.
Speaker Change: Inadvertently used millions as a point of two percentages there so I wanted to clarify that for the entire call that take great
Speaker Change: differential was 2.8% in 24 and 3.3 in 2023. This will tee up.
Speaker Change: James to give comments on take rate impact based on segment but the only other place I want to make a quick clarification is we talked about the comparison of custodial cash in 24 to 23 and I think we inverted 478 it was 487
Speaker Change: So let me just clarify those points and then James I'll turn it over to you on this sort of relationship take great to
Speaker Change: We're seeing an increasing diversity of sources and each of those pools come with different rates overall. I think to give a bit more colour to that, I think what we saw in 2024 was
James Nevin: In general, larger trade sizes, so overall volumes were up with the next of those volumes. We saw an increasing number of large blocks and those large blocks often come at a lower rate.
James Nevin: Hot Names and Hot Sactors and whether those supply and demand dynamics in a smaller number of stocks or sectors that also affects the rate that we charge on one or other side of the trade or maybe on both sides of the trade.
James Nevin: and the commentary we were giving earlier around SBVs and particularly third party SBVs.
James Nevin: We see this, as Kay says, in common term in reply to Devin. We see this generally as a very beneficial to the market in terms of the volume and liquidity, but a number of those SPVs, especially the third body ones, have...
James Nevin: Cost embedded in them already and therefore the cost that we charge for trading with those SBVs again can be lower.
James Nevin: and I think those factors overall really lead to our belief that
James Nevin: Over time, we're going to see increased volumes from all those trading dynamics.
But...
James Nevin: as we go through that progression, we expect to see what we've seen in 24, that is that any
Speaker Change: Okay, wonderful. No, I appreciate all the color. And just follow up. I mean, James, I'll just stick with you on my follow up.
You know, we've talked through again some revenue top line commentary, you know, and for 1K and 25. I just...
Speaker Change: I'm sorry if I missed it, but there's a number of moving pieces on the cost saves, you pointed out 1.9 million of the cheap cost saves, and I'm trying to think through as 25 progresses, how should we think about...
Speaker Change: Comp, or even headcount expectations as you look ahead, given the improving backdrops that we've
Speaker Change: Yeah, I think what I'd say on that is we've achieved the cost savings that we set up to achieve. I think cost control is kind of the mode into 2025.
Speaker Change: I think if you look at the numbers we put out, especially in the charts, on the slides.
Speaker Change: I think you can think about looking at Q4 and normalizing the numbers there for the one-off within the period. And then, as we said, we are, we are continue to selectively invest in kind
Speaker Change: in some other functions as well, during 2025. And while we do that, we'll have a little bit of additional cost as we go through the kind of powertile run. And I think the other point I'd make is,
Clearly we have...
some costs that are variable or tight to revenue increases.
Speaker Change: and you can see that on the year of the year slide that we put in as well.
Speaker Change: So as you think about revenue using increasing, I think there's been variable cost and that variable gross margin using what was close there can help you get kind of the right kind of numbers that were thinking for 20-25 cost-based.
Okay, perfect. Thank you so much.
Speaker Change: Thank you, Mike. We have a few questions from e-mail. I guess one of them is about forge liquidity and also the RA fund business and where forge is going with the two of us.
Well, liquidity.
Speaker Change: is a big partner. And we were really excited to see their SEC filing that I referenced I think on a previous question.
We are convinced.
that
Speaker Change: More access translates into more liquidity and more scale for Ford's in the private market.
So, the fact that they've got a 40-act fund...
That's been filed with the SEC.
to allow investors that have not been able to access.
that have not been able to access this private market.
is incredibly interesting for the future of the private market.
Speaker Change: and if you take a look at their fund performance in 2024, it was powered by the Forge Private Market Index, it's up 17%.
Speaker Change: through the year. So, our view is, there's a lot of investors out there excited about the Mag 7. We think the private Mag 7 is a really interesting basket and we think that the liquidity represents.
Speaker Change: The emergence of what I refer to in the talking points.
as Innovative Investment.
Speaker Change: Vehicles that are emerging in the marketplace. So we are really going to push heavily on this in 2024 and the leadership of equity, their background and what they previously have done shows that asset managers that were very, very big.
Speaker Change: in passive fund management over the last 10 years are moving into the private asset class, so we're really excited about them.
Speaker Change: And remind me, what was the other point besides the liquidity on there? The other point was related to kind of the SPB.
Speaker Change: Ralph at Porch Clans to take or try to leverage. Yeah, I think I covered that mostly in Devin's piece. I just think that besides single name, SVVs, you're going to see some emergence of multi-name baskets. I also just want to say that the overall market is moving into SVVs, too. This is not...
Just a force phenomenon.
Speaker Change: But that's one of the reasons why we kind of kept this under wraps for Ohio. We didn't talk about this at all until maybe one or two calls ago. So, you know, the the billion dollar AUM or close to billion dollar AUM that we reported has been building for the last few years. We expect that to be.
Speaker Change: You know, an interesting area of growth and potential opportunity for us going forward.
Speaker Change: Great. Do we not have any other analysts? I think we're nearing time. Okay. We thank you for your interest and for joining us on today's fourth quarter 2024 and full year 2024 conference call. And we look forward to seeing everyone out on the conference circuit.
and Meeting James. So, thank you. Thank you, Dale.
Thank you everybody.
Speaker Change: Thank you. This concludes today's conference call. You may now disconnect.
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