Forge(FRGE)2023-08-13 18:42Financial Data and Key Metrics Changes - Forge's total revenue less transaction-based expenses increased by 8% to $16.6 million in Q2 from $15.5 million in Q1 [7][9] - Placement fee revenue, less transaction-based expenses, rose by 22% to $5.6 million in Q2 compared to $4.6 million in Q1, marking the first improvement in six quarters [7][9] - Custody administration fees continued to rise for the seventh consecutive quarter, reaching $11 million in Q2, benefiting from the higher interest rate environment [8][20] - The net loss for Q2 increased to $25.1 million from $21.3 million in Q1, with noncash expenses rising significantly [11] - Adjusted EBITDA loss improved to $11.8 million in Q2 from a loss of $13 million in Q1 [11][18] Business Line Data and Key Metrics Changes - Total custodial cash balances decreased to $550 million at the end of Q2 from $574 million at the end of Q1, primarily due to cash sorting and search for yield [10] - Total company accounts remained flat at 2 million in Q2, while assets under custody increased by 3% to $15.3 billion [21] - The overall net take rate increased from 3.6% in Q1 to 3.7% in Q2, slightly above historical averages [20] Market Data and Key Metrics Changes - Transaction volume increased by 20% to $153.2 million in Q2 [18][20] - The bid-ask spread on the Forge platform narrowed from 30% in April to between 17% and 18% in May and June, indicating improved pricing alignment between buyers and sellers [82] Company Strategy and Development Direction - Forge aims to position itself at the center of the private market ecosystem, leveraging technology, data, and expertise to capture pent-up demand as private market activity expands [16][17] - The company launched the Forge investment outlook in July, providing institutional-grade research to enhance transparency in the private market [19] - Forge is committed to reducing its burn rate while investing in future growth, focusing on key strategic priorities [32][79] Management's Comments on Operating Environment and Future Outlook - Management noted that the private market is experiencing a "great reset," with valuations significantly lower than previous funding rounds, which may pressure companies to adopt lean growth strategies [74][106] - There are signs of improvement in the market, with expectations that Q3 results will match or exceed Q2 performance [76][88] - The management expressed optimism about the recovery of the private market, although they remain cautious about potential macroeconomic risks [86][87] Other Important Information - Forge was added to the Russell 2000 index, validating its position as a category leader [8] - The company continues to monitor cash usage and has taken measures to reduce costs while maintaining strategic hires in critical areas [22][47] Q&A Session Questions and Answers Question: What are the potential wildcards that can derail the recovery trend? - Management highlighted macroeconomic trends and the delay in fundraising as potential factors that could slow the recovery in private markets [85][86] Question: How has the valuation of AI companies impacted the overall market? - Management indicated that while AI companies are generating interest, the overall market valuations are not solely driven by them, and the recovery is still in early stages [24][89] Question: What is the outlook for transaction volume and market normalization? - Management expects transaction volume to equal or slightly exceed Q2 levels, indicating a positive trend towards normalization in the market [23][76]