• Revenue Growth: 15% increase over last quarter, 32% rise compared to the year-ago quarter.
• Marketplace Revenue: Up 103% compared to the year-ago quarter.
• Transaction Volume: Increased 62% from $263 million in Q1 to $426 million in Q2.
• Net Take Rate: Decreased from 3.2% to 2.7% in Q2.
• Custodial Cash Balances: $495 million at the end of Q2, up from $481 million in Q1.
• Net Loss: Declined from $19 million to $14 million quarter over quarter.
• Adjusted EBITDA Loss: $7.9 million compared to a loss of $13.5 million last quarter.
• Cash and Cash Equivalents: Ended the quarter at $121.6 million, excluding term deposits.
• Headcount Reduction: Reduction by roughly 11%, resulting in estimated annual savings of $11.3 million.
• Assets Under Custody: $16.6 billion, essentially flat from last quarter.

• Warning! GuruFocus has detected 3 Warning Sign with FRGE.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Forge Global Holdings Inc (NYSE:FRGE) recorded its fifth consecutive quarter of revenue growth, with a 15% increase over the last quarter and a 32% rise compared to the year-ago quarter.
• Marketplace revenue surged by 103% compared to the year-ago quarter, indicating strong recovery and growth in the private market.
• The company has made significant investments in next-generation technology platforms, enhancing operational efficiency and positioning itself for market reawakening.
• Forge Global Holdings Inc (NYSE:FRGE) is seeing increased institutional interest, with a notable shift in the ratio of buy-side to sell-side interest.
• The company has announced cost reduction measures, including an 11% reduction in headcount costs, expected to save $11.3 million annually, accelerating its timeline to profitability by 2026.

Negative Points

• Despite revenue growth, Forge Global Holdings Inc (NYSE:FRGE) reported a net loss of $14 million for the quarter, although this was an improvement from the previous quarter.
• The net take rate decreased from 3.2% to 2.7%, influenced by large block trades that drove higher volume at lower take rates.
• Custodial cash balances and assets under custody remained essentially flat, indicating limited growth in these areas.
• The company anticipates a slowdown in transaction volume during the third quarter due to seasonal factors like summer vacations and holidays.
• Forge Global Holdings Inc (NYSE:FRGE) is still projecting to achieve breakeven adjusted EBITDA only by 2026, indicating a longer path to profitability.

Q & A Highlights

Q: With the expense actions you're taking, how should we think about a revenue range that could support a break-even level for the company going forward? A: Mark Lee, CFO: We are using the growth in marketplace revenues from the first half of 2024 compared to the back half of 2023 as a proxy for future growth. This extrapolation helps us model the break-even point in 2026.

Q: Trading volumes and take rates were above expectations. Was this due to more institutional players returning to the platform? A: Mark Lee, CFO: Yes, we are seeing increased institutional interest, with more buy-side interest exceeding sell-side interest. This has led to higher volumes and lower take rates, a pattern we've observed in previous years.

Q: Can you provide more color on the cost actions and the path to profitability in 2026? A: Mark Lee, CFO: Our model assumes improvements in productivity and efficiency from technology investments. We expect gross margins to improve, and we plan to keep costs relatively flat while incorporating the announced expense savings.

Q: Could you remind us of the dynamics between the IPO market and your transaction volume? A: Mark Lee, CFO: A functioning IPO market generates enthusiasm for investing in private companies pre-IPO. Historically, increased activity occurs when companies announce plans to go public, as investors seek to participate in potential gains.

Q: How is your data business performing, and what are you doing to increase adoption? A: Kelly Rodriques, CEO: We are focusing on data adoption and have employed a strategy to get Forge data everywhere. We are seeing good uptake on Forge Pro and data usage, and we look forward to reporting specifics in the next earnings call.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.