Forge Global Holdings, Inc.

Thank you, JL, and thank you all for joining us today for Forge's fourth quarter and full year 2024 earnings call. This call will be a bit longer as we recap the full year. Joining me today from Forge are Kelly Rodriguez, CEO, James Nevin, Forge's new CFO, Mark Lee, CFO Emeritus and Chief of Strategic Wealth Solutions, and Dominic Pichelle, SVP Finance and IR. Just after market closed today, we issued a press release announcing FORGE's fourth quarter and full year 2024 financial results. A discussion of our results today complements the press release, which is available on our investor relations page. This conference call is being webcast, and in a change from prior quarters, we will show slides during this presentation. The replay of the webcast, as well as the slides, will be available via the IR page of our website shortly after the conclusion of this call. We will also post to that page our prepared remarks and investor supplemental document, which consolidates some relevant metrics. During this conference call, we may make forward-looking statements based on current expectations, forecasts, and projections as of today's date. Any forward-looking statements that we make are subject to various risks and uncertainties, and there are important factors that could cause these actual outcomes to materially differ from those included in these statements. We discuss these factors in our SEC filings, including our annual report on Form 10-K, which will be found on the IR page of our website after it is filed. As a reminder, we are not required to update our forward-looking statements. In our presentation today, unless otherwise noted, we will be discussing adjusted financial measures, which are non-GAAP measures that we believe are meaningful when evaluating the company's performance. For detailed disclosures on these measures and the gap reconciliations, you should refer to the financial data contained within our press release, which is also posted to the IR page. Today's discussion will focus on the fourth quarter and full year 2024 results. As always, we encourage you to evaluate both annual and quarterly results for a full picture of FORJA's performance, which can be affected by unexpected events that are outside of our control. With that, I'll turn it over to Kelly, our CEO.

Thank you, Lindsay and Dom. Good afternoon, everyone, and thank you for joining us today. We closed out 2024 with 13% year-over-year revenue growth and a strong pipeline. Despite a muted fourth quarter stymied by the presidential election cycle, our year-over-year revenue improvement included a 46% increase in marketplace revenue, which grew to $37 million. As Q4 came in near even to Q3, I'm happy to report we've observed improving overall market dynamics and growing deal activity, aided by the technology improvements we delivered to support our leading marketplace. We are encouraged by signs of a strong start to the year, which we believe bode well for a more active 2025 market. These include a relatively low bid-ask spread and improving valuations, as reported, in our February Forge Private Market Update. The Forge Private Market Index is up 33% over the prior three months as of the end of February, outpacing major indices like NASDAQ and the S&P 500. In February, the index experienced its largest single-day gain in its history, jumping 20%, mostly driven by Figure AI's 850% price increase. Other index names have announced sizable tender offers, including Stripe, which saw a valuation improvement of 31% with its funding news. This demonstrates that the rally we're observing may be broadening beyond the AI sector, which has driven the bulk of momentum over the past several months. Meanwhile, the IPO pipeline is expanding. With 13 IPO filings of planned raises of $100 million or more in January, which is the highest monthly total of filings of this size in three years, and evidence that some of the high-demand companies like CoreWeave may be the first this year to test the waters. As we've discussed, IPO activity often generates increased platform activity in the private market, as investors gain confidence that exits are a near-term possibility. While these are all encouraging signs, we're conscious that we still haven't seen the IPO floodgates open. And the political environment and concerns about the impact of tariffs and other economic and foreign policy matters have the potential to drag enthusiasm. From where we sit, with three weeks to go in Q1, our pipeline currently stands at its highest level in almost three years. And with that, we expect the marketplace revenue for Q1 will meet or exceed our best quarter in 2024, which gives us optimism heading into Q2. While anticipating a more robust market recovery, we've stayed focused on the step changes required to push this market forward, including achieving a fully automated trading experience, exposing more data transparency, and enabling the creation of new financial products to drive more access and liquidity into the private market, all built on the Forge Next Generation platform. And we've done this while diligently managing costs as we drive toward our commitment of achieving profitability in 2026. Now, reflecting on our accomplishments in 2024, we're proud of the technology and pricing innovations we delivered to the market to date. Our Forge price pricing standard is enjoying broader acceptance among private market participants, as well as data distributors and media publishers who rely on Forge price to better understand performance, track trends, and make investment decisions. We're proud that in 2024, we were first to market with standard setting indices, the Forge Private Market Index and the Forge Equity Private Market Index. that are the foundations on which new financial products that drive access to the private market are being built. And we're proud of the technology innovation our team continues to deliver, including Forge Pro, which delivers the advanced institutional trading capabilities to 400 of our sophisticated investor clients to allow them to fully participate in this market. We're encouraged that as the market continues to evolve, we've been able to capture supply from a greater diversity of sources, giving us access to a broad range of deal flow through various investment vehicles. This includes singular holdings, sizable block trades, third-party funds, and our marketing and data-driven sources, plus our investment funds managed by Forge Global Advisors, where we now have close to 100 funds with just under one billion of AUMs. We believe our progress in delivering technology, driving data transparency, and enabling financial product innovation, as well as our role as a central nervous system for the private market, is driving the asset class toward a tipping point. And we're looking forward to what we will deliver this year to meet the moment. I'll turn it over to our CFO, James Nevin, to talk about the fourth quarter and annual financials in more detail. But before I hand it to James, I'd like to state how grateful I am for Mark Lee's contribution to Forge over the last six years and for his steady and diligent leadership. Mark continues to be an incredible resource to James as we undergo this transition. Both Mark and James are here today and will be taking questions with me during Q&A. Now to James.

Thanks, Kelly. It's an exciting time to be joining Forge from the London Stock Exchange Group, and I'm honoured to be part of a transformational moment for both Forge's future and for the private market. I've been here less than two months, but I'm excited about the potential we have as we execute against our strategy and long-term vision. I first want to discuss the key messages coming from the Q4 results and the outlook coming into 2025. Q4 marketplace revenues came in at the bottom end of our expected range. The uncertainty we saw in the run up to the US presidential election subsided towards the end of Q4. And as Kelly said, we entered 2025 with a strong deal pipeline, which has continued to grow through the first quarter. As expected, custodial cash administration fees were affected by the numerous federal rate cuts we experienced in 24. And even though the speed of cuts in 25 could be slower than we expected, we will experience the full impact of the November and December cuts in the first quarter. We fully executed against the cost savings we announced in August last year. And cost focus remains key as we enter 25, whilst balancing selective investment into our key strategic initiatives, including continuing to roll out enhancements to our next generation platform, as Kelly discussed. Turning to the detailed results for the fourth quarter of 2024, Forge's total revenue less transaction-based expenses were 18.3 million as compared to 19.1 million in the last quarter. Revenues were affected by a number of factors, including uncertainty leading into the US presidential election, as well as the pace of Fed interest rate reductions. This contributed to an uncharacteristically soft fourth quarter in our marketplace business. Total market-based revenue was approximately flat at 8.6 million in the current quarter compared to 8.7 million in the prior quarter. Revenues were driven by a decrease in transaction volume to 299 million from 338 million in the prior quarter. However, our net take rate increased to 2.8% from 2.6% in the prior quarter. The impact of these factors on the quarter-over-quarter market-based revenues are shown in the waterfall graph on the top right of the slide. Total custodial administration fees were 10 million in the current quarter compared to 10.5 million in the prior quarter. The decline was largely driven by lower cash administration fees. Our custodial cash administration fee rate was affected by the numerous federal rate cuts during and preceding Q4, which had a negative effect on our revenues, as you can see in the waterfall graph in the bottom right of the slide. And as I mentioned before, the full impact of these rate cuts will continue to affect our revenues in this area of the business as we go into 2025. Our custodial cash balances totaled $483 million at the end of Q4 as compared to $470 million at the end of Q3, a modest increase of 3%. At the end of Q4, total custody counts increased 4% from $2.3 million in the prior quarter to $2.4 million. and assets on the custody increased 2% from 16.6 billion to 16.9 billion, both driven by our custody as a service business offerings. Our fourth quarter operating expenses decreased 3 million to 37 million from third quarter expenses of 40 million. We continue to realize the 11.3 million cost savings we announced in August, 2024. As a reminder, we expected two thirds of these savings to come from run rate operating expenses and one third from future cost avoidance. Looking at the waterfall chart on the bottom right of the slide, the additional 0.6 million of run rate impact in the quarter brings the total quarterly run rate savings to 1.8 million or 7.2 million on an annualized basis. In addition, we took action before the end of 24 which will result in a further 1 million of annualized cost savings. When combined with a 3.8 million of costs, we removed it from our operating plan. This has resulted in total cost savings of 11.9 million and an overachievement against our original stated goal. While the cost of achieving these savings was lower quarter over quarter, included in the 0.7 million net amounts you can see on the slide is 1.9 million of costs recognized in the fourth quarter. which relates to severance cost and a non-cash lease impairment as we reduced our office footprint. We are selectively continuing to invest in our people and our technology and will continue to do so through 2025. We have started to utilize offshore locations for technology and other functions with some temporary increases in cost as we run parallel across locations to ensure operational stability. These are the major contributors to the 0.8 million cost increase shown on the charts. Non-cash items include the impact of changes in share-based compensation and depreciation, both of which we expect to continue to slowly decline in 2025. Our 16 million fourth quarter net loss decreased from the 18.8 million net loss in the third quarter. low operating expenses and higher other income, primarily due to more favorable reductions in the fair value of warrant liabilities, were partially offset by low revenue net of transaction based expenses. Adjusted EBITDA is a key measure of our operating results as it generally aligns more closely with our operating cash burn. In the fourth quarter, adjusted EBITDA loss was 10.9 million compared to a loss of 11.4 million last quarter. Net cash used in operating activities was 7.9 million in the current quarter compared to 5.8 million last quarter. This increase was primarily driven by working capital movements. Cash, cash equivalents, and restricted cash ended the quarter at 106.3 million compared to 115.6 million last quarter, as Forge continues to maintain a strong balance sheet. Given the strength of balance sheets and our confidence in the execution of our strategic goals, which support our path to profitability, we are also announcing today that the board has authorized a stock buyback program of up to $10 million. This reflects our belief that forged stock is currently significantly undervalued. And opportunistically buying back stock therefore represents a compelling opportunity for the company to increase shareholder value. Now to recap our strong full year results for 2024. Forge's total revenue less transaction based expenses was 78.7 million and 9.3 million or 13% improvements from the 69.4 million a year ago. During 2024, we saw a significant change in the mix of our revenue as marketplace revenues improved and custodial administration fees were down year over year. Marketplace revenues totaled 37.5 million, up 46% from 25.8 million in 2023. 2024 trading volume was up 73% to 1.3 billion compared to 766 million in 2023. And the average net take rate for 24 was 2.8 million compared to 3.3 million in 23. As Kelly articulated, we have made considerable progress diversifying our sources of liquidity on both the buy and the sell side. We now have access to a breadth of liquidity that other market participants do not, including sizable block trades, access to our own and third-party SPVs, issuer relationships, institutional asset management relationships, marketing-driven volume, and data-driven volume. This mix is increasing our volumes in absolute terms, and increasing the stickiness and quality of liquidity flows. Our pricing varies for accessing these different liquidity pools, and as such, we continue to see variability in our net take rates. We expect increases in volume to continue to outweigh any declines in averaged net take rates over time. The absolute revenue effect of these volume and net take rate factors is shown in the chart on the top right of the slide, combined with the positive effect we saw in the year across other contributing marketplace revenue drivers, including data and our investment management business, Forge Global Advisors. Heading into 2025, we are continuing to see the benefits of these diversified liquidity sources and contributing marketplace revenue pools, such as the Q1 marketplace revenues are performing in line with our expectations of a post-election recovery in investor sentiment. However, having reviewed street averages, revenues for the fall year 2025 exceed our current expectations. Total custodial administration fees were $41.8 million in 24 compared to $44 million in 23. Cash administration fees, the larger components of custodial administration fees, are highly correlated to custodial cash balances and the level of interest rates. You can see the year-over-year impact on the waterfall chart on the bottom right. The impact of the decline in average custodial cash balances to $478 million in 24 from $556 million in 23 was partially offset by higher rates in 24. The Federal Reserve reduced interest rates by taking 100 million basis points over the course of 24 as compared to an increase of 100 basis points over the course of 23. Custodial cash balances were $483 million in the end of 24 compared to $505 million at the end of 23. In 2025, we expect to generate lower cash administration fees. Total custody accounts increased 14% year over year to $2.4 million from $2.1 million. The growth in accounts came from our CAS or custody as a service business, which have lower account fees. However, we saw less revenue generating activity in 24 from our core self-directed IRA accounts, which led to the 0.9 million decline you can see in the bottom right of the slide. Assets under custody ended 2024 up 8% year over year to 16.9 billion from 15.6 billion at the end of 23. Our operating expenses were broadly flat year over year, As you can see in the graph, our in-year cost to achieve our announced cost savings exceeded the savings realized in the period. However, as I said earlier, we ended the year on track to realize 8.2 million in annualized run rate cost savings. We have a number of items in our cost base which are linked to revenue growth, and these grew by 4 million, but were offset by other positive year-on-year savings of 1.3 million and positive movement in non-cash items of 4.1 million. Our full year net loss was 67.8 million in 24, an improvement of 23.7 million from the net loss of 91.5 million last year. The lower loss was attributable to 9.3 million in higher revenue and 15.9 million in higher other income due to favorable reductions in the fair value of warrant liabilities. Our fiscal year 2024 adjusted EBITDA loss was 43.7 million, compared to an adjusted EBITDA loss of 48.8 million in 2023. The improvement in adjusted EBITDA loss is in line with a lower 2024 net loss adjusted for non-cash items. Net cash used in operating activities was 40.5 million in the year, basically flat compared to the net cash used in operating activities of 41.5 million in 2023. 2024 included one-time cash payments of 4.3 million in connection with the resolution of legacy legal answers. As of December 31, 2024, our total employee count sits at 300, down from the 331 on December 31, 2023. This headcount excludes contractors, including a growing number located offshore, which augments our technology capabilities in a cost-effective manner. From a housekeeping perspective, our weighted average basic number of shares used to compute net loss was 186 million shares and our fully diluted outstanding share counts as of December 31st was 201 million shares. For Q1, we estimate 187 million weighted average basic common shares for EPS modeling purposes in a loss position. Having reviewed our medium term plans in my first couple of months at Forge with a strengthening private market investor sentiment, and a strong and growing pipeline in the first few months of 2025, we remain confident in our target of reaching adjusted EBITDA break-even in 2026. I plan to provide more detailed guidance on our path to this goal in the coming quarters. I'll hand it back to Kelly before we go to questions.