Forge(US:FRGE)2023-11-12 13:39Financial Data and Key Metrics Changes - In Q3, Forge's total revenue less transaction-based expenses increased by 11% to $18.4 million from $16.6 million in Q2 [88] - Placement fee revenue less transaction-based expenses improved by 27% to $7.1 million compared to $5.6 million last quarter [92] - Adjusted EBITDA loss narrowed to $10.4 million in Q3, better than the loss of $11.8 million in the previous quarter [95] - Net loss decreased to $19 million compared to $25.1 million last quarter, attributed to increased revenue and a decrease in non-cash expenses [96] Business Line Data and Key Metrics Changes - Transaction volume increased by 53% to $234 million in Q3 compared to Q2 [88] - Custody administration fees rose to $11.3 million in Q3, continuing to provide stability to revenue streams [89] - Total custodial accounts remained flat at approximately 2 million, with assets under custody at $15.1 billion [94] Market Data and Key Metrics Changes - The bid-ask spread narrowed to 15% by the end of Q3, down from a peak of 30% in April [99] - The Forge Private Market Index posted a 1.1% performance gain in Q3, outperforming both the S&P 500 and NASDAQ [99] - The number of unique issuers with closed transactions on the Forge platform grew by 37% from Q1 to Q3 [100] Company Strategy and Development Direction - The company is focused on expanding its data strategy and plans to roll out new products in 2024 that combine proprietary market data with enhanced trading capabilities [90][102] - Forge aims to maintain a disciplined approach to cost management while investing in technology and product innovations [101] - The company is optimistic about entering the European market in 2024, viewing it as a significant opportunity [61] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the market recovery, noting that improvements may not be linear due to ongoing geopolitical instability [101] - The company is committed to reducing cash burn and managing costs effectively while navigating the current economic environment [96][97] - There is a recognition of the need for companies to reset their valuations for a full market recovery [48] Other Important Information - The company has seen a significant increase in buy-side interest, with the total number of buy-side IOIs reaching the highest level since Q1 2022 [3] - The company is actively monitoring the geopolitical environment and its potential impact on market conditions [97] Q&A Session Summary Question: What is the outlook for trading volume in Q4 compared to Q3? - Management indicated that while they do not provide specific guidance, they noted that Q3 saw significant trading volume increases, but the macroeconomic environment remains a concern [58] Question: How is the competitive environment affecting take rates? - Management acknowledged that while there is pressure on take rates due to lower transaction volumes, they believe their competitive position remains strong [79] Question: What are the trends in right of first refusal (ROFR)? - The number of issuers doing ROFRs remained at historic highs, slightly over 20% in both Q2 and Q3 [82] Question: Can you provide an update on the international strategy? - The company is optimistic about entering the European market in 2024, having built a team and received positive feedback from the local venture capital community [61] Question: How is the company managing cash balances amid cash sorting? - Management noted that custodial cash balances decreased due to cash sorting, but they are focused on growing the custody business and adding new accounts [54]