Forge(FRGE) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2024, Forge recorded total revenue of $22 million, up 15% from the previous quarter and up 32% year-over-year [10] - The net loss decreased from$ 19 million to $14 million quarter-over-quarter, attributed to improved revenue and lower operating expenses [13] - Adjusted EBITDA loss was$ 7.9 million, compared to a loss of $13.5 million in the previous quarter [13] Business Line Data and Key Metrics Changes - Marketplace revenue reached$ 11.4 million, up from $8.5 million last quarter, reflecting a 35% increase quarter-over-quarter and a 103% increase year-over-year [10] - Transaction volume increased 62% from$ 263 million in Q1 to $426 million in Q2, nearing full year 2023 levels [11] - The net take rate decreased from 3.2% to 2.7%, influenced by the completion of several large block trades [12] Market Data and Key Metrics Changes - The number of companies represented by indications of interest (IOIs) increased to 551 in Q2, the highest number on record [18] - U.S. IPO proceeds reached$ 23.2 billion year-to-date, exceeding full year 2023 IPO proceeds, with a 37% increase in the number of IPOs [19] - U.S. late-stage venture funding totaled $19.5 billion in Q2, a 61% improvement compared to the year-ago quarter [19] Company Strategy and Development Direction - The company is focused on advancing its next-generation technology platform to enhance operational efficiency and market position [6][8] - Forge aims to achieve breakeven adjusted EBITDA by 2026, supported by cost reductions and revenue growth [8][15] - The company is committed to maintaining investment levels in its technology platform while implementing cost-saving measures [36] Management's Comments on Operating Environment and Future Outlook - Management noted positive momentum in the private market, with buy-side interest outpacing sell-side interest [17] - The bid-ask spread has narrowed to 6.4%, indicating improved market conditions [17] - Management remains optimistic about the future, despite potential market fluctuations due to external factors [19] Other Important Information - The company announced a reduction in headcount costs by approximately 11%, expected to generate annualized savings of$ 11.3 million [7][15] - Cash, cash equivalents, and restricted cash at the end of the quarter totaled $121.6 million, down from$ 130.7 million in the previous quarter [14] Q&A Session Summary Question: What revenue range could support a break-even level for the company going forward? - Management indicated that the revenue model extrapolates recent growth to project future revenues, which supports the break-even model for 2026 [21][23] Question: What is the dynamic behind the lower take rate despite higher trading volumes? - Management noted an increase in institutional interest and explained that higher volumes from block trades can lead to lower take rates, a trend observed in previous years [24][25] Question: Can you provide insights on cash burn trajectory in relation to the break-even target? - Management clarified that the model is based on adjusted EBITDA, with expectations for improved productivity and efficiency contributing to future margin enhancements [26][27] Question: How does the IPO market influence transaction volume? - Management explained that a functioning IPO market generates enthusiasm for pre-IPO trading, leading to increased transaction activity [30][31] Question: What is the competitive landscape for private market indexes? - Management expressed confidence in their competitive advantage due to the depth of their data and the unique positioning of their indices compared to others in the market [42][43]