8-K: Forge Global Holdings Reports Strong Q2 2024 Results with Revenue Growth and Expense Reductions

Forge Global Holdings, Inc. announced a 15% quarter-over-quarter increase in total revenue less transaction-based expenses and a 62% increase in trading volume for the second quarter of 2024, alongside planned expense reductions.

Summary

• Forge Global Holdings, Inc. reported its financial results for the quarter ended June 30, 2024, showing significant growth in key areas.
• Total revenue less transaction-based expenses reached $22.0 million, a 15% increase compared to the previous quarter and a 32% increase year-over-year.
• Marketplace revenues, less transaction-based expenses, grew to $11.4 million, up 35% quarter-over-quarter and 103% year-over-year.
• Trading volume surged to $426.3 million, a 62% increase quarter-over-quarter and a 178% increase year-over-year.
• The company's net take rate was 2.7% for the quarter.
• Forge is implementing planned expense reductions expected to save an estimated $11.3 million annually.
• The operating loss improved to $17.7 million, compared to $25.0 million in the previous quarter.
• Net loss was $14.0 million, an improvement from the $19.0 million loss in the prior quarter.
• Adjusted EBITDA showed a loss of $7.9 million, compared to a loss of $13.5 million in the previous quarter.
• The company ended the quarter with a cash balance of $120.5 million.
• The basic weighted-average number of shares used to compute net loss per share was 183 million, with a fully diluted outstanding share count of 201 million.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong revenue and trading volume growth, as well as planned expense reductions. However, the company is still operating at a loss and the net take rate decreased, which tempers the overall sentiment.

Positives

• Forge Global achieved its fifth consecutive quarter of revenue growth.
• The company experienced significant growth in trading volume, indicating increased market activity.
• Expense reductions are expected to improve margins and accelerate the timeline to profitability.
• The adoption of the Forge Accuidity Private Market Index by Accuidity demonstrates market recognition.
• The launch of Forge Europe expands the company's global reach and access to liquidity.
• The company has improved its operating loss, net loss, and adjusted EBITDA compared to the previous quarter.
• Forge has a strong cash balance of $120.5 million.

Negatives

• The net take rate decreased from 3.2% to 2.7% compared to the previous quarter.
• Total Custodial Administration Fee revenues decreased slightly by 1% quarter-over-quarter.
• Net cash used in operating activities increased to $14.4 million from $12.4 million in the previous quarter.
• The company is still operating at a loss, with a net loss of $14.0 million for the quarter.

Risks

• The company's performance is subject to market conditions and private company valuations.
• The company's forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from current expectations.
• The company's non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation.
• The company's net take rate decreased, which could impact future revenue if not addressed.
• The company is still operating at a loss, and its ability to achieve profitability is not guaranteed.

Future Outlook

The company anticipates that subsequent events and developments will cause its assessments to change, but it specifically disclaims any obligation to update forward-looking statements. The company is focused on improving margins and accelerating its timeline to profitability through planned expense reductions.

Management Comments

• Kelly Rodriques, CEO of Forge, stated that the 15% increase in revenue over Q1 was attributable to increased trading activity as the market reawakens.
• Kelly Rodriques also mentioned that the company continued to invest in its Next Generation Platform technology and delivered additional products and capabilities to market during the downturn.
• Management stated that they are in a position to advance planned cost savings and deliver them to the bottom line.

Industry Context

Forge Global's results reflect a broader trend of increased activity in the private securities market as the market reawakens. The company's expansion into Europe also aligns with the growing global demand for access to private company liquidity. The adoption of the Forge Accuidity Private Market Index by an institutional asset manager indicates a growing acceptance of private market indices as a tool for investment strategies.

Comparison to Industry Standards

• Forge Global's 62% quarter-over-quarter increase in trading volume is a strong result compared to other private market platforms, although direct comparisons are difficult due to the lack of publicly available data for all competitors.
• The company's net take rate of 2.7% is within the range of other private market platforms, but the decrease from 3.2% in the previous quarter is a point of concern.
• Forge's expansion into Europe is a strategic move similar to other global private market platforms, such as Nasdaq Private Market, which also has a presence in Europe.
• The adoption of the Forge Accuidity Private Market Index by Accuidity is a positive development, as it indicates a growing acceptance of private market indices, similar to how public market indices are used by institutional investors.
• Forge's focus on technology and data services is consistent with the trend of private market platforms investing in technology to improve efficiency and transparency.

Management Changes

Stakeholder Impact

• Shareholders will likely view the revenue growth and expense reductions positively.
• Employees may be impacted by the planned headcount reduction.
• Customers will benefit from the expanded services and increased liquidity.
• Suppliers and creditors may see increased business opportunities with the company's growth.

Next Steps

• Forge will continue to implement planned expense reductions to improve margins and accelerate the timeline to profitability.
• The company will further expand its operations in Europe into Austria, Switzerland, and France.
• Forge will host a webcast conference call on August 7, 2024, to discuss the financial results and business highlights.
• The company will file its Quarterly Report on Form 10-Q on or around August 7, 2024.

Key Dates

Keywords

private securities, marketplace, trading volume, revenue growth, expense reductions, adjusted EBITDA, net loss, custodial accounts, private market index, Forge Europe