Forge(US:FRGE)2024-03-26 20:42Part I Business Forge Global Holdings, Inc. operates a financial services platform for the private market, offering trading, custody, and data solutions - Forge's platform is built on three core, complementary solutions: Trading (Forge Markets), Custody (Forge Trust), and Data (Forge Data)2025 Key Business Metrics (as of December 31, 2023) | Metric | Value | | :--- | :--- | | Assets Under Custody (Forge Trust) | $15.6 billion | | Custodial Accounts (Forge Trust) | 2.1 million | | Transaction Volume (since inception) | Over $14 billion | | Number of Transactions (since inception) | Approx. 25,000 | | Companies Traded (since inception) | Approx. 570 | | Registered Users | Approx. 636,000 | - The company's growth strategy focuses on scaling its platform, introducing new products, forming partnerships, expanding internationally (e.g., Forge Europe with Deutsche Börse), exploring new asset classes, and pursuing strategic acquisitions464748 - Forge operates several regulated subsidiaries in the U.S., including a broker-dealer (Forge Securities LLC), an investment adviser (Forge Global Advisors LLC), a non-depository trust company (Forge Trust Co.), and a licensed lender (Forge Lending LLC)71727374 Risk Factors The company faces significant risks, including a history of net losses ($90.2 million in 2023) and uncertainty in achieving future profitability, intense competition, dependence on volatile macroeconomic and private market conditions, and an extensive and complex regulatory environment Recent Financial Performance | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Loss | $90.2 million | $111.9 million | | Accumulated Deficit (as of Dec 31, 2023) | $280.6 million | | - The business is subject to extensive regulation by U.S. state, federal, and non-U.S. authorities, including the SEC and FINRA, which requires significant expense and resources for compliance88120 - International expansion, such as the establishment of Forge Europe, exposes the company to new risks including managing international operations, navigating different regulatory environments (e.g., BaFin in Germany), and currency fluctuations129130132 - The company is exposed to significant cybersecurity risks, including data breaches and system disruptions, and is subject to stringent data privacy laws like GDPR and CCPA, which could result in significant penalties for non-compliance145153177 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None194 Cybersecurity Forge has established a comprehensive cybersecurity risk management program integrated into its overall risk framework, overseen by the Head of Information Security (CISO) and a dedicated team, with regular reporting to management-level risk committees and oversight from the Board of Directors - Cybersecurity risk management is integrated into the overall risk framework, with processes for assessing, identifying, and managing threats195 - Governance includes a CISO reporting to a management-level risk committee, with ultimate oversight by the Board of Directors and its risk committee201202 - The company has not experienced any cybersecurity incidents that have materially impacted its business, strategy, results of operations, or financial condition to date200 Properties The company's corporate headquarters is located in San Francisco, California, occupying approximately 21,800 square feet under a sublease expiring in December 2025, with additional leased office spaces in California, South Dakota, and New York - The main corporate headquarters is in San Francisco, CA, under a sublease agreement that expires in December 2025203 Legal Proceedings Information regarding the company's legal proceedings is disclosed in Note 8, "Commitments and Contingencies," of the consolidated financial statements - Details on legal proceedings are available in Note 8 to the consolidated financial statements206 Mine Safety Disclosures This item is not applicable to the company - None207 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Forge's common stock trades on the New York Stock Exchange under the symbol "FRGE", with approximately 120 stockholders of record as of December 31, 2023, and the company has never paid cash dividends nor anticipates doing so in the foreseeable future - Common stock is traded on the NYSE under the symbol "FRGE"210 - The company has never paid cash dividends and does not intend to in the foreseeable future212 - There were no repurchases of equity securities during the three months ended December 31, 2023215 Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2023, total revenues less transaction-based expenses were $69.4 million, a slight increase from $68.9 million in 2022, driven by a 53% increase in Custodial administration fees to $44.0 million offsetting a 37% decrease in Marketplace revenue to $25.8 million, resulting in a net loss of $90.2 million, an improvement from a $111.9 million net loss in 2022, primarily due to a 27% reduction in compensation and benefits expense, with Adjusted EBITDA at a loss of $48.8 million and $144.7 million in cash and cash equivalents at year-end Key Business Metrics (Year Ended Dec 31) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Trades | 1,756 | 2,184 | (20)% | | Volume | $765.9 million | $1.22 billion | (37)% | | Net Take Rate | 3.3% | 3.3% | 0% | | Total Custodial Accounts | 2,078,868 | 1,871,146 | 11% | | Assets Under Custody | $15.65 billion | $14.87 billion | 5% | Consolidated Results of Operations | Line Item | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Marketplace revenue | $25.8 million | $40.7 million | (37)% | | Custodial administration fees | $44.0 million | $28.7 million | 53% | | Total revenues, less transaction-based expenses | $69.4 million | $68.9 million | 1% | | Compensation and benefits | $106.6 million | $145.5 million | (27)% | | Operating loss | ($91.4 million) | ($135.0 million) | (32)% | | Net loss attributable to Forge | ($90.2 million) | ($111.9 million) | (19)% | | Adjusted EBITDA | ($48.8 million) | ($46.9 million) | 4% | - The decrease in Marketplace revenue was driven by lower trading volumes attributed to macroeconomic conditions and pricing volatility268 - The increase in Custodial administration fees was driven by higher cash administration fees from the higher interest rate environment269 - Compensation and benefits expense decreased by $38.9 million (27%), primarily due to a $22.1 million decrease in incentive compensation (including the absence of a one-time $17.7 million transaction bonus from 2022) and a $23.6 million decrease in share-based compensation expense270271272273 - As of December 31, 2023, the company had cash and cash equivalents of $144.7 million and an accumulated deficit of $280.6 million, with management believing existing cash is sufficient to meet operating needs for the next twelve months281282 Financial Statements and Supplementary Data This section contains the audited consolidated financial statements of Forge Global Holdings, Inc. for the fiscal years ended December 31, 2023, 2022, and 2021, including the report from the independent registered public accounting firm, Ernst & Young LLP, and detailed notes - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements316 - The auditor's report identifies the impairment assessment of goodwill as a Critical Audit Matter due to the subjectivity and complexity of estimating the reporting unit's fair value, which involves significant assumptions like discount rates and growth projections320322 Consolidated Balance Sheet Highlights (as of Dec 31) | Account | 2023 | 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $144.7 million | $193.1 million | | Goodwill and other intangible assets, net | $129.9 million | $133.9 million | | Total Assets | $310.7 million | $363.7 million | | Total Liabilities | $42.3 million | $38.3 million | | Total Stockholders' Equity | $268.4 million | $325.5 million | Net Loss Per Share | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Basic Net Loss Per Share | ($0.52) | ($0.78) | | Diluted Net Loss Per Share | ($0.52) | ($0.80) | Changes in and Disagreements With Accountants on Accounting and Financial Disclosures The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None520 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December 31, 2023, and also assessed the internal control over financial reporting based on the COSO framework, concluding it was effective with no material changes during the period - Management concluded that disclosure controls and procedures were effective as of December 31, 2023521 - Based on the COSO framework, management concluded that internal control over financial reporting was effective as of December 31, 2023523 Other Information During the fourth quarter of 2023, several executive officers, including the CEO, COO, and CGO, adopted or modified Rule 10b5-1 trading plans for the sale of company common stock, with some plans specifically for selling shares to cover tax withholding obligations upon the settlement of RSUs - CEO Kelly Rodriques modified a Rule 10b5-1 trading plan on December 8, 2023, to increase the number of shares covered, up to a maximum of 3,989,958 shares, contingent on performance conditions527 - COO Drew Sievers adopted a Rule 10b5-1 trading plan on December 15, 2023, for the sale of up to 225,000 shares528 - On December 15, 2023, several executive officers adopted trading plans exclusively for selling shares to satisfy tax withholding obligations related to RSU settlements530 Disclosure Regarding Foreign Jurisdiction that Prevent Inspections This item is not applicable to the company - None531 Part III Directors, Executive Officers and Corporate Governance The information required for this item will be incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - Information is incorporated by reference from the 2024 Proxy Statement535 Executive Compensation The information required for this item will be incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - Information is incorporated by reference from the 2024 Proxy Statement536 Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters The information required for this item will be incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - Information is incorporated by reference from the 2024 Proxy Statement537 Certain Relationships and Related Transactions, and Director Independence The information required for this item will be incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - Information is incorporated by reference from the 2024 Proxy Statement538 Principal Accounting Fees and Services The information required for this item will be incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders - Information is incorporated by reference from the 2024 Proxy Statement539 Part IV Exhibits, Financial Statement Schedules This section lists the exhibits filed with or incorporated by reference into the Form 10-K report, including the Merger Agreement, Certificate of Incorporation, Bylaws, various compensatory plans, and certifications - This section contains the Exhibit Index, which lists all documents filed as part of the report541542 Form 10-K Summary The company has not provided a summary for this item - None547