FRGE - NYSE

Welcome to Forge’s First Quarter Fiscal 2022. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded and transcribed. I would now like to turn the conference over to Dominic Paschel, Senior Vice President of Forge. Please go ahead.

Thank you, Josh, and thank you all for joining us today for Forge’s first quarter 2022 earnings call. Joining me today are Kelly Rodriques, Forge’s CEO; and Mark Lee, Forge’s CFO. They will share prepared remarks regarding the quarter results, and then take your questions at the end. Just after market close today, we issued a press release announcing Forge’s first quarter financial results. A discussion of our results today is complimentary to the press release, which is available on the Investor Relations page of our website. This conference call is being webcast live and will be available as a replay for 30 days. Beginning about one hour after the conclusion of this call, there’s also accompanying presentation on our IR site. During the course of our conference call, we may make forward-looking statements based off of current expectations, forecast and projections, as of today’s date. Any forward-looking statements that we make are subject to various risks uncertainty, and there are important factors that could cause actual outcomes to differ materially from those included in our statements. We discuss these risk factors in our SEC filings, including in our 1Q 2022 Form 8-K, which can soon be found on our IR website. 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 GAAP reconciliations you should refer to the financial data contained within our press release, which is also posted the IR website. Today’s discussion will focus on the first quarter 2022 results. As always we encourage you to value Forge’s performance on an annual basis. As quarterly results can be affected by unexpected events, that are outside our control. With that, I’ll turn it over to Kelly.

Thank you, Dom, and good afternoon, everyone. I’d like to start off by thanking those who we met through our public process, and those who have been with us from the beginning. You’ve seen the numbers on our press release, my remarks today will cover three main areas. First, for those new to our business, I’ll briefly take you through the Forge story. Second, I’ll cover our first quarter results and recent business highlights; and third, and this is timely, I’ll discuss how you can expect periods of heightened market volatility to interplay with our results. So, let’s walk through the Forge story. Forge just broadening access to the private market by increasing liquidity, access transparency, and efficiency. I joined the journey in 2018, because I saw a massive opportunity to build the infrastructure that would unlock an entirely new global market for alternative assets. It was an opportunity that connected all my experience as a multi-time startup CEO, a financial services CEO, and a long-time private investor. The private market proposition is as compelling and volatile times as it is in stable times. Over the past 20 years, technology companies have increasingly stayed private longer. The unicorn universe has expanded. There are almost 1,300 unicorns worth more than $4.5 trillion that are building substantial value for their shareholders and growing quickly with the help of unprecedented levels of investment capital. Unicorns were minted at a rate of about 3.6 per month in 2015; in 2021 about 50 unicorns were minted per month. And even amid of volatile market some 35 new unicorns were minted in April of 2022 down from last April’s, 52, but still above historic averages and about triple, the number created in April, 2020. More of the growth and value creation in these companies is now taking place while they remain private. And unless investors can access and participate in that growth before the companies go public or are acquired, they can’t benefit from many of these companies highest growth periods. Meanwhile, due to their longevity as private firms, a growing number of shareholders and employees are seeking liquidity while companies remain private. At the same time, companies need technology, services and infrastructure to ensure they’re able to manage their shareholders’ needs and to stay competitive when hiring and retaining talents. Now, while the market opportunity was clear, the private market historically lacked liquidity, access and transparency. Our traction is a testament to our strategy, the technology and infrastructure, and the solutions we built to solve those problems at scale. At Forge, we built our business around complimentary solutions, including markets; company solutions, data, and custody, that works synergistically to drive significant network effects and an ecosystem of partners that delivers private market access at scale. Through Forge markets, we’ve traded in more than 500 global private companies. We have investors in more than 70 countries. We’ve enabled more than $12 billion in transaction volume, and more than 142,000 accredited investors have registered on our platform. I working with so many emerging unicorns, shareholders and investors, and completing so many trades across such a range, a wide variety of sizes and structures. The Forge platform has become an impressively capable trading engine. Our data business is addressing the huge gaps in private market price discovery, providing visibility to investors, and adding a high margin, predictable revenue source to Forge’s diversified portfolio. Our custody business makes it easy to hold value and manage private assets and is adding another source of predictable recurring revenue to our portfolio. Let me just say, this is an exciting time at Forge. The private market opportunity continues to expand, and while we’re only scratching the surface of the total addressable market today, long-term, we have a lead in developing the technology platform, credibility and traction that puts us in a great position to continue to lead this market, whether the market is up or down. So, now onto Forge’s first quarter 2020 financial results – I’m sorry, 2022 financial results. In the first quarter of 2022, total revenues less transaction-based expenses were about $20 million compared to about $31 million in the year ago quarter. There was historical context that helps explain some of the volatility from quarter-to-quarter, which I will come back to shortly. This will help shed light on our business and how market volatility affects revenue during certain periods. But before we get into that, I’ll cover a few highlights in the quarter. In the first quarter of 2022, there were more distinct private companies with shares offered for sale on the Forge’s platform than in any previous quarter. Total custodial administration fees rose 20% year-over-year to $5.4 million, reflecting, both pricing power and more accounts. Total custody accounts increase 25% year-over-year to $2.2 million in the first quarter of 2022 from $1.7 million in the first quarter of 2021 and assets under custody increased 9% year-over-year to $14.9 billion in Q1 up from $13.8 billion in the first quarter of 2021. We also continue to make traction and create new relationships through partnerships with top tier banks. In Q1, we signed a strategic agreement with Wells Fargo to connect their clients to Forge and the private market asset class. During the first quarter, we also signed our first six-figure enterprise customer for Forge Data. And we’re just getting started. This revenue stream will add more predictable SaaS-like revenue and diversify our total revenue portfolio. In Q1, we also launched the new Forge Private Market Update or PMU that leverages Forge’s own for proprietary data to distribute insights that can help private market investors make intelligent decisions about investments, and investing strategy. In addition to adding value for current investors already investing data is helping us reach new audiences, such as lending platforms that are using our data to value private assets. And while we’re still in the early innings, we’ve already seen new subscribers to our data product have increased their engagement within our trading platform, resulting in more trades among those customers on our platform. And finally, we welcome James H. Herbert to our Board of Directors, and are excited to benefit from the insight and council of this financial services leader. Jim founded First Republic Bank in 1985, serving as its Chairman and CEO before being appointed Executive Chairman in 2022. He’s highly recognized in his industry as one of the top financial services executives in the country. Now coming back to the revenue volatility, I’d like to provide some history. When COVID first struck in 2020, it initially disrupted trading on the Forge’s platform as dislocation occurred, so to speak. But after the first few months of the COVID lockdowns, capital markets swiftly recovered and regain their footing with IPO and SPAC volumes accelerating, as well as record levels of venture capital flowing. Trading in private stocks also accelerated on the Forge platform, leading to several record quarters during the second half of 2020, and the first half of 2021 buyers came back to the table, as Forge saw the total number of indications of interest or IOIs grow more than 50% from the first half of 2020 to the second half of 2020. Now last year, we call record quarters amid the extremely active IPO period as Forge benefited from increased demand from investors to access soon to be public stocks, as well as record levels of venture capital flow. However, the volatility in the markets this quarter has created a very different environment. As we experience with COVID volatility in the first half of 2020 private market trading slowed in the first quarter of 2022 in reaction to the trifecta of; one, rapid rising inflation and expectations of rising interest rates; two, the geopolitical instability and additional inflationary pressures of the Russia-Ukraine war; and three, continued and exacerbated supply chain disruptions due to COVID in China. The effect of these global conditions started to fully impact our business in the last month of the first quarter, as a cause and effect another dislocation occurred. Sellers held tight to the premium expectations experienced in the boom of 2021 while buyers expected discounts on par with public market declines. Both current buyers and sellers are waiting for recall the price discovery equilibrium to be reestablished. Very simply price discovery equilibrium is the convergence of when bids and asks cross. And when sellers and buyers agree on a price. When there is a sudden and rapid geopolitical or economic crisis, or both, in illiquid markets, the bid and ask spreads widen, and it takes time for buyers and sellers to readjust their expectations. However, and this is important to understand once they do in our experience, volumes begin to rise. Over time as Forge brings more transparency, liquidity, and access to the private market, we expect to improve the efficiency of price discovery in private markets, thereby reducing the lag effect on price discovery equilibrium. Now while active IPO periods generally benefit our business, we also believe that the illiquidity problem that Forge was created to solve is exacerbated when exit timelines are delayed in down markets, as stability returns to the market, and as price discovery equilibrium is reached. Forge is also well positioned to benefit from an IPO standstill, as the pent-up demand for liquidity grows. We are in an in between period right now where price expectations are recalibrating in the face of continued headwinds. During this time in the capital markets, so fewer trades are happening, we believe the private company supply is increasing, and we expect that as markets begin to stabilize and price discovery once again finds equilibrium that should translate to more cross trades on our platform. At least for most the IPO window is all but closed or is at least delayed. And as private companies have extended exit timelines, we expect they will be looking to Forge for alternative liquidity solutions to help retain and compete for talent. Now, I’ll turn it over to Mark Lee, our CFO.

Thanks, Kelly. I am excited to be here on our first public company call as a long-time finance executive for companies, including Goldman Sachs, the Stanford Management Company, and Charles Schwab, this personally thrilling to help steer Forge as we help enable an entirely new category. As a public company, we’re delivering to the broadest group of investors yet. And for the first time, the opportunity to access the uniquely compelling growth dynamics of the private markets through an investment in Forge common stock. We are revolutionizing the private markets through our technology, and our comprehensive product portfolio. We feel that we are pursuing a massive global opportunity, and we’re just getting started. First quarter of 2022, Forge’s total revenue less transaction-based expenses was $19.9 million, down from $31.1 million in the year ago quarter. Of that amount, total placement fee revenues reached $14.6 million down from the record first quarter of 2021, where total placement fees came in at $27.5 million. As Kelly previously noted Q1 of 2021 last year was an extraordinarily strong quarter for the overall market with record public market debuts and significant flows of VC investments into private companies. Transaction [ph] volume in this quarter was $418 million, a 45% decrease from the quarter ended March 31, 2021, a result of macroeconomic and geopolitical instability that triggered a dislocation from price discovery equilibrium. Average net take rate for the quarter remained constant year-over-year at 3.5%. As we’ve previously indicated fluctuations in take rates are generally attributable to changes in the mix of individual versus institutional block rates. Total custodial administration fees rose 20% year-over-year to $5.4 million, reflecting both increased pricing power and growth in total accounts. Q1 2022 GAAP net loss was $64.4 million compared to the net gain of positive $938,000 in Q1 2021. This includes $58.6 million in one-time and noncash expenses of which $21.4 million were one-time expenses of acquisition bonuses and transaction costs. And $31.8 million were noncash expenses due to change and fair value of warrant liabilities and share space compensation catch up. As detailed in our reporting, total compensation expense of $43.6 million for the period includes a combination of closing related compensation items of approximately $23.5 million that were unique to this quarter. Adjusted EBITDA is an important measure of our operating results. In the first quarter, we registered an adjusted EBITDA loss of $7.1 million compared to the total adjusted EBITDA gain of $5 million in the year ago, same quarter. We include the reconciliation of adjusted EBITDA to the most recently comparable GAAP measure, both in the press release and SEC filings for further details. Cash flow from operations. Net cash used by operating activities was $30.2 million in Q1 compared to net cash used by operating activities of $1.2 million in the year ago quarter, this included a one-time cash transaction bonus of $10.4 million. Keep in mind from a seasonality perspective that the first quarter is also when we pay out annual cash bonuses. And for the quarter, that was $10.7 million. Through this successful March original listing on the NYSE, Forge raised $215.9 million in gross cash proceeds slightly higher than previously announced due to the cash on hand at Motive Capital Corporation. Cash, cash equivalent, and restricted cash at the end of the period, now totaled $204.1 million fortified from the $38.4 million a year ago. Turning now to guidance. Given the present volatility and uncertain market conditions, Forge will neither reaffirmed the full year 2022 revenue outlook previously provided in February of 2022 prior to the completion of the business combination nor provide any guidance at this point in time. Forge will continue to monitor and evaluate to determine whether to change our forward guidance practice in the future. Inevitably, there are tough comps from our all-time record first half that we saw in 2021, but as markets stabilize; we expect our growth to resume to normalize levels relative to the huge opportunity in front of us. While managing through this environment of uncertainty and high market volatility, we are actively managing our costs and investments to be good stewards of capital while maintaining our focus on growth and building the company. We continue to invest in technology, sales and marketing, and public company infrastructure to support our growth. As we scale and our investments bear fruit, we expect our cost to decelerate as a percentage of revenue. We ended the quarter with 312 in total head count. Our most important asset is our people, and we will continue to invest in and expand our employee base at an appropriate pace. Looking at the long-term financial model, due to the flywheel effect of a comprehensive Forge platform, our goal remains sustained compounded organic revenue growth of 20% to 25% annually once market stabilize, and that we believe should lead to profitability and 30% to 40% adjusted EBITDA margins over time. So with that, let me hand the call back to Kelly.

Thank you, Mark. I want to end up something I started with. We have a long-term vision. Our market opportunity remains as clear and volatile times as it does in stable times. The private market is accelerated, and we’re as confident today as we’ve ever been in our market physicians and in our ability to build on our growth. As we look ahead, in addition to scaling the core business, we are focused on accelerating growth through a number of vectors, expanding on our client base through increased sales and marketing spend, driving supply side volume through company liquidity programs, driving buy side volume through global institutional and strategic partnerships, ramping up Forge Data and expanding our footprint internationally. If you take away one message from today’s call, it should be this. We can expect up and down quarters that’s par for the course and something we long ago accepted as the heavy work of enabling a new asset class, but we are not distracted by temporary volatility and are well positioned to benefit once volatility subsides, whether the market is up or down. Meanwhile, we’re going to continue to invest in the business because our vision is a long term one. Our intention is to build a big global company that continues to lead in this market. We are well capitalized and focused on executing on our vision for the future. Thank you.

Awesome operator. Can you open to questions please?

[Operator Instructions] Your first question comes from the line of Rich Repetto with Piper Sandler. Your line is open.

Yes. Good evening, Kelly and Mark. And I guess, the first question Kelly goes to your, I guess the, the PDE the price discovery equilibrium, and you gave the example of how the recovery from COVID in early 2000, but is there any historical background on how you would do you know, if there’s a recession – recessionary period, and I guess the follow up to that is, I wasn’t sure what you meant, but do you, are you saying that you are expect to outperform or perform better earlier than the IPO markets are in line with the IPO markets?

I’m going to have you repeat the second part. Actually, would you mind repeating, the first part, there’s lot of [ph] break too?

Yes, I let me get a shorter and briefer, just that. How do you expect to do in a recessionary environment would be the first part?

Okay. So first of all, the fundamental feature that we’re pointing to on this price discovery equilibrium, is that period until buyers and sellers meet. And I think what we’re in, I talked about being in this middle period. What we’re in is this period, where buyers are expecting discounts during, the same period that sellers haven’t capitulated to the actual market that is with us. And that period is hard to predict. It’s one of the reasons we’ve taken the position we’ve taken in terms of guidance. But I guess the answer, that I would go further to say is, once we do hit price discovery equilibrium, we expect to satisfy some of the pent-up demand for liquidity that is there today. That’s not being met. So, I’d say if you look at this over an extended period of time, depending on how long this dislocation lasts, one major point I want to get across rich is, we think will be a viable trading environment, even in down markets, once price discovery equilibrium has been met. And if that extends for a significant period of time, my comments were meant to indicate that we believe Forge will benefit from periods of extended difficulty of companies exiting as well as periods when companies are exiting, like we saw last year, it’s just this middle point that we’re in right now, that’s troubling. And then we talk about outperforming or in line with, I didn’t understand that part on the IPO market, like, should we trade with the IPO market? I think, we definitely will see some relationship in our performance to how the IPO market is doing. And we saw that last year because we did have four consecutive record breaking quarters during some of the most exciting IPO times, but I actually, and we all believe that we could perform in a counter environment as well once this price discovery equilibrium settles down.

Okay. And just one very quick thought, you said there was more distinct private companies offering shares in the first quarter. I think then was it a record or I guess, is there any metric that’s get, that sort of brings out like that this is, where you don’t have price discovery equilibrium?

Yes. We debated whether or not we were going to put a number out. We don’t want to put a number out, but I will verify that yes. In the first quarter, there have never been more distinct companies on the platform, in the history of the company that we saw in Q1. So that was a record.

Okay. Thank you. Thanks for the envelope.

Thank you, Rich. Appreciate it. Josh, can we go to Devin, please?

Certainly your next question comes from line of Devin Ryan with JMP Securities. Your line is open.

Hey, great. Good afternoon, Kelly, Mark. How are you guys?

Great.

Great, Devin

Good. Well I’ve follow up, I guess on Rich’s line of questioning. So, obviously appreciate, the market dynamics right now and, just that we’re, in your words, kind of in an IPO standstill, I’m curious just to kind of think about some of the lags in transaction activity, after we do hit that point of equilibrium, because clearly once we get there, it’ll take some time to kind of get transactions going. So, I’m curious kind of just as we’re looking from the outside, if there’s kind of a normal timeframe between market stabilizing and then, transactions coming to market and then revenues being realized. And then kind of on the same line of questioning, is there a preferred market backdrop, obviously, hot IPO market was nice to some degree, but I think you described him another scenario where IPOs are slower, but that could also be, really compelling backdrop to the firm. So do you prefer one of the other is maybe the second part of the question?

Why don’t you start with the first part?

So Devin, this is Mark here. I mean your first question kind of related to the lag. And I think that as we’ve talked before, I mean what we’re doing, what Forge is doing here, helping buyers and sellers transact and private companies stock, right? These are private placements, the process of trading theory and settlement. It is a longer process typically than the public markets. These trades typically do not settle T [ph] plus two, as you are aware. And so there is an extended time to match, settle and close a transaction. However, I think the key part of your question really is, and what’s happening at Forge is no different than what you’re seeing in the broader markets, right. Buyers are kind of fine their putting and what we’re saying, and what Kelly has indicated, we’re seeing kind of high, very high end record levels of interest of selling sellers. And it’s simply a matter of when are the buyers ready to come back in to the markets, right? And that’s the same thing that’s happening in the public markets as well. So when that happens, that’s when we’ll be able to match trades and resume kind of the normalized levels of volume that we expect. And as you’re question indicated that there is, more time, in the average private company transaction than it takes in the public markets. And so, there is a longer lead time.

Why don’t I take the second one, Devin real quick. I think we all prefer markets that are going up into the right. But we’ve also been observant back in 2020 of what volumes look like in public exchanges when there was people really rushing for the door and trying to sell I think we’re positioned as we create more visibility and price discoveries to benefit from periods of slower or down market activity. And I think the only thing stopping us from benefiting now is this dislocation period of price discovery. So if you sort of say, okay, once we’re past that and buyers and sellers are on the same page, relatively in terms of pricing, then we should be able to benefit from that market as well. And that was the real point of saying in this sort of IPO standstill, we should do well. But we have to get to the point where buyers and sellers are reasonable in terms of pricing. And that’s the period that we’re in between now.

Hey, Devin, and this is mark again, I’d like to add a few more comments. I mean, while clearly when there’s a strong IPO market, it does kind of give us wind at our back. It creates in an extra excitement in private companies, but even without a strong IPO market, as we’ve talked about in our Analyst Day presentation, and you’ve seen these metrics, right, we’re at a very nascent stage of evolution in creating this segment. So, some of the stats you’ve seen were we created 219 companies in 2021 only 17% of the unicorn universe. We traded with 2,800 unique counterparties in 2021. And that’s a very small fraction of the nearly 450,000 registered users that we have on our platform. So, and as Kelly mentioned, the opportunities to build and improve our technology, increase our sales and marketing to build these numbers to add new products and to expand our global reach. I mean, all of these are opportunities and we’re just extremely excited about. And so kind of regardless of whether there’s a strong IPO market, regardless of whether, we hit kind of a difficult recessionary period, we think there’s just massive opportunity that should result in growth of Forge in the years to come.

Okay, great. That’s a nice segue, I guess, into my follow up question. Just on the Forge Data platform and I know you guys noted in the press release that you signed your first six-figure customer in the first quarter and appreciate, these are some of the areas that that could be, much bigger legs of the stool over time. So, I guess, I’m curious, what the early feedback has been around the product and then if you can give us any other sense of kind of the pipeline or other insights into just how to think about the trajectory in that product from here?

Yes. So this is Kelly, let me take this one. We had a pretty extended beta period for this product and had a pretty good sense of the base level entry of the product, which prices about $20,000 to $24,000 a year. And I’d say that if you’re active in the market, we find it hard to believe you wouldn’t see value in seeing data both in terms of IOI data and pricing data that came before you, if you’re interested in participating in this market, I think what’s particularly noteworthy about this announcement that we just made in Q1 is for a large enterprise buyer to put six figures to get access to the full electronic order book, says that the market gets it, the product market fit is encouraging. And I’d say we, it validates for us the product market fit point that we’re at right now. And I think at this point, this all about execution. We’ve just got to get out there and sell it. And as time goes on, it becomes more valuable as the volume and scale of the company increases. But we think this is one of the things that drives the decrease in that that PDE period, because the more visibility, more investors have of what’s come before what bids an as look like, the more realistic they are about what it takes to get a transaction done, whether you’re a buyer or seller. So it’s very encouraging leading indicator for us that, that a large financial institution would want that kind of comprehensive access to the data. So more to come.

Yes. Terrific. If I can squeeze one more quick one in here just on the run rate of activity. I’m not sure how much you guys can provide, but my sense is activity started the year and then kind of slow just with the backdrop kind of through the through the end of March. Is there any way to get a sense of, I’m assuming that environment’s persisted into the beginning of second quarter? Is that a fair characterization or are there any other kind of puts and takes to think about in the backdrop, if you could share those.

Yes. Devin, this is Mark. I mean, Kelly kind of described the trifecta different global macroeconomic factors that impacted our business in Q1. And I think we also made the point that the combination of those three factors really started to impact our business in the latter part of the quarter. Beyond that, as we’ve said earlier, given the uncertainty and volatility of the market, we’re not going to be providing kind of guidance beyond that.

Yes. Okay. Completely understand. Thanks so much for taking my questions, guys.

Thank you, Devin.

Ken, can we patch you in?

Your next question is from Ken Worthington with JPMorgan. Your line is open.

Hi, thank you for taking the questions. So you’ve made a pretty big deal about the price discovery gap [ph] throughout the call in the Q&A. So, what is the gap? It looks to me like emerging growth is down 60% this year public markets are down 15%. It would suggest the gap is 45% or so. Is that about right? Or is it bigger or is it smaller? Because if we’re trying to figure out when this gap goes away and business gets back going, be helpful to know how big a gap we need to kind of overcome here.

So, what we’ve published so far, Ken in the PMU and this maybe doesn’t answer the question of the gap at the moment, but it does answer a little bit of the lag, when markets were started to disrupt and you saw public pricing go down in Q4, our first PMU reported something like a 3% decrease in the overall, across the board pricing on the platform. And as we ended Q2, I think we reported on 20% decrease. I’m sorry, Q1, as we ended Q1 20% decrease, so if you look at it that way, but we are still not at the level of decrease of the overall public markets. And while we do have some data that we’re looking at it’s not in a state that makes us comfortable representing how much further we have to go, but I’d say we’re around 20% coming out of Q1.

Hey, Ken this is Mark. I would refer you to the PMU and you probably do get it. There is specific information there about the discounts that buyers are seeking to the last brown versus the discounts that sellers are expecting. So there is, that’s an ongoing publication and you’ll see another release of our PMU, tomorrow.

So, okay, good looking forward to that. And then, this is probably me misunderstanding the corporate participation, you said you didn’t want to give out that data. But, said a couple times it was at record levels, isn’t by definition that only going to grow over time, my guess is you don’t hang out your buyers of these investments. You don’t hang them out. So once they buy, they’re going to have liquidity to kind of sell out. So doesn’t that number just sort of only go up over time?

Well, we hope it does. Because as Mark pointed out, the unicorn numbers are growing at phenomenal rates and have been for the last four or five years. So, I’d say we look at one tailwinds longer term is the idea that private companies that are staying private longer will start to appear on our platform as one of the market leaders, as long as we move through time. And as we’ve seen, the private unicorn count has expanded to close to 1,300. I got here in 2018 when the number was 260. And so yes, we do expect that to continue to go up into the right, but we’re tracking it carefully because it does indicate for us adoption of private companies that may not have come to the conclusion that liquidity programs are valuable for, their employees and their shareholders or employees who haven’t realized and have awareness that they can look at and possibly liquidate some of their share. So, I think this is really a measure of the market evolving and while the markets are down, it’s just an indication that new companies are continuing to show up on the platform. And we expect that to continue. Another thing that I’d say, and if Mark, you want to add anything, go ahead. I’d say, we’ve tried to measure concentration over time so that we had a more diverse set of participants on the platform and not the three to five biggest unicorns in the world, driving all of our revenue. And I’d say for us, it’s always a positive indication to see more names and more diverse names in a period appear in one quarter. So, we’ll continue to follow that and talk about it as we move through time.

Hey, Ken this is Mark. Let me add another point on top of Kelly’s. So, I think that we, as we’ve discussed in the past kind of in a normal market environment, right, the typical situation is that there are a lot of people interested in investing in private companies and getting access. So typically the as represented by our IOIs, right, we have more IOIs on the buy side than on the sell side. And more typically our process then in order to match and complete trades is to locate and find the liquidity on the sales side in order to meet the buyer, and then close a transaction. And of course, as you would expect in this environment, in fact, now that’s flipped on its head. And as Kelly indicated, we have more selling interest being put on our platform, in terms of offers IOIs than we’ve ever had in the past. And a number of companies represented, by those IOIs is larger than it’s ever been. And so this is part of what we’ve talked about, where historically we’ve only traded 17% of the unicorn universe, but as more and more sellers in this environment are seeking liquidity. Now we can offer a wider breadth of inventory to the buyers, right? And so I think it’s a vindication that, kind of what we’re expecting to happen, it’s happening, particularly in the current environment. And as soon as kind of we can bring in the buyers and the buy and the price can stabilize, then we can consummate these trades, and expand our business.

Okay, great.

Thank you, Ken.

And then just – go ahead.

Go ahead.

Then lastly, where you do have control. I think Devin asked on expenses. I think you guys mentioned that you would be good stewards of capital, but that your pace of spending and investment will continue to rise, but maybe the pace of that increase will lessen, kind of depending on market conditions. Did I sort of interpret your comments on costs correctly?

Yes. That’s exactly right, Ken. Let expand on that. So, let start by noting that Forge started generating positive adjusting EBITDA margins in 2017. Growing the company, advancing our vision, it’s always been our top priority and remains our top priority. But as I said, as you heard, we also appreciate the importance of being good stewards of the capital entrusted to us by our investors. So our goal has long been to target slightly positive adjusted EBITDA with breakeven to slightly negative cash earned. We do not believe in managing the company to investment some spends towards growth at all costs. So, I do want to add that the recent public debut is fortified our balance sheet, as I had indicated earlier in the call. And that does give us greater flexibility. So this is, a volatile time, but for us, it’s finding now the right balance to invest appropriately and judiciously during this uncertain time while still trying to be able to focus on growing the company. So yes, I’ve put a lot of additional kind of description in there, but I’m agreeing kind of with your characterization.

Okay, good. You’re agreeing with me, and I’m agreeing with you. We’re all in a good place. So thank you very much.

Thank you, Ken.

Okay, next Josh, please.

Certainly your next question comes from Alex Cram with UBS. Your line is open.

Yes. Hey, good evening, everyone. I may have to come back to a couple of the questions that were asked before and just maybe hope to get a little bit more specific. So, first on the activity levels and understand that you may not want to give more, but you made this comment of March being lower than the rest of the – or the beginning of the quarter. Can you maybe help us a little bit by saying like January and February, how the business was running, maybe relative to any of the quarters that we’ve seen over the last four or two years, I guess, where we have data for. So, we have a little bit of a sense and then obviously second, same question on what you’re seeing so far this quarter. Maybe again, characterize it in the context of March or the beginning of the year. Any additional color would be really helpful as obviously we’re all trying to figure out how the environment is shaping up?

Yes, so Alex, this is Mark. Look I think, we’re not going to get into Q2. We think we believe that given the nature of our business, it doesn’t make sense. It’s inappropriate for us to provide greater details and guidance, but let me kind of go back to what we said and, the things that, that we all know that if you think about kind of the market and the way it’s progressed in the last couple of quarters, now that hit a all time high back in November, it declined through the middle of February. But then if you think about the middle of February, and after that point in time, then NASDAQ declines 12% points its high in November to the middle of February. And then the middle of February up to yet to last Friday declined another 17%. In addition, the Russia and Ukraine war started on February the 24. So, I know these are all things that Alex you already know, but I’m trying to kind of provide additional context in terms of when we talk about this trifecta, that the business started out, and clearly there was already an impact from the inflationary expectations kind of being discussed and out there in the marketplace. But of course these other factors really started to accelerate later into the quarter. So, I know that’s not a direct answer to your question. That’s about as much as we’re kind of prepared to comment on at this point.

Fair enough. Maybe another one that you can give some more detailed question on also a follow up on the expense outlook. If my math is correctly, I think you adjusted EBITDA expenses, which is basically just sales minus adjusted EBITDA, I think with $27 million in the quarter. So, when I compare that to some of the prior quarters, this was actually the lowest expense number in the last year. I think Q1 was also $27 million, but spent a lot more in the back half. So, my question is, have you actually pulled back a little bit, and then more importantly as we look forward, are you kind of budgeting with that kind of run rate in mind right now? Or how should we be thinking about maybe flexing that $27 million up or down for the remainder of the year, any sort of distinct items you want to call out, maybe corporate company cost that is not in that run rate, anything in this run rate that we should be thinking about on a quarterly basis going forward? Thank you.

Well, what I would tell you, Alex, is that, we did increase our headcount significantly in 2021 going from roughly 200 people to 300 people. We expect to continue to add heads, although perhaps at a more judicious pace that there are variable costs in our cost structure. We do have and this is in our filing, there is bonus compensation that is where we compensate our team relative to performance. And so we do have variable cost elements to our cost structure, but we do expect to continue to hire in order to focus on growth.

Okay, that’s helpful. And just one quick one, I squeeze in here. In terms of share counts, because obviously this was a kind of semi-public quarter. Can you just remind us and maybe that number’s out there already, what you view as the fully dilutive share count here going forward, we should be using given with the stock price has been, and where the second quarter should be starting. So, we know the good starting point here. Thank you.

Hey Alex, I think that is something that well for now being in a loss position where we’re only using the basic share count for our EPS reporting. As far as the fully diluted numbers, I think that’s something that we will provide additional information at a point soon.

Okay. We can always follow up off line. Appreciated.

Yes. Let point out something, Alex, and you’re probably aware of this. Of course, our share count for Q1, recall that for the first 2021 – first the majority of the quarter the share count is based on Forge’s standalone. And then of course you to calculate the weighted average, you then include in these last nine days of the quarter, right? The additional shares that came through the business combination, as well as the conversion of the preferred stock, the common for Forge. So, that’s probably factored into your calculation. I just – I wanted to remind you that. And then we’ll go ahead and provide additional information on the calculation of employee diluted in the near future.

All right. Sounds great. Thanks for that.

Thank you, Alex. We’ll take our last question. If we can from Owen.

Certainly your next question comes from Owen Lau with Oppenheimer. Your line is open.

Good evening and thank you for taking my questions. Going back to the point, Mark you make about there are more sellers than buyers. Could you please talk about other than the improvement of macro factors, is any offset, anything else that can attract more buyers such as, I don’t know, the willingness for private companies to lower the valuation, or you can find ways to attract more bias to your platform. And also if you can touch on how you’re expanding your outreach efforts on the buy side in this environment that would be great? Thank you.

Okay. Yes. thank you, Owen. One of the points that we tried to make, and drive home in a couple different places in our prepared comments were about price discovery. These are really exciting companies and I don’t think anybody would deny some of the most interesting companies in the world are being created, and are staying private a lot longer. And one of the fundamental questions is, what should I be paying for them? And in conditions like this the more information we can provide about what’s come before? What people are willing to sell for and having more information that that we provide on our platform that can help make that decision the better? So, I think that attracting buyers right now in this market is about transparency and pricing. And so we’re really excited about this and that’s part of the reason I made this comment about decreasing the lag effect of the price discovery equilibrium. I’m not sure if we got cut off during that part, but the more information and more data there is available to buyers coming into the space, the more confidence they have, that what they’re paying is a fair price. And that’s really what the PDD is all about. Is there a fair price that I can mark to as markets are volatile? So, I’d say that’s probably what jumps to the top of my mind around how we could help.

Hey, Owen this is Mark. Thanks for the thoughtful question. I think, I would add also to Kelly’s comment that these private companies, these unicorn companies, they’re the most innovative, they’re among the most innovative companies that are growing the fastest creating opportunity for investment alpha. There are still plenty of investors, even in this typical environment that have dry powder and are going to be looking to invest and take advantage of the buying opportunity. And I think what we believe is happening, particularly with our public debut, there’s more and more investors that are learning about Forge for the first time. When we were out raising the pipe and talking to large institutional investors, there were many that were not familiar with our company, and many that said, wow, I didn’t know there was a Forge, it’s such a great thing that you guys are trying to build. I think there’s a really big need for this. So, I think we really believe that there’s a lot of institutions that we have not yet been able to work with that are learning about the business, learning about the opportunity to access private companies directly. And I think that is part of the answer to your question.

Awesome. Thank you, Josh, thank you, Owen. I think Kelly wanted to say one last thing.

Yes. I just wanted to thank everybody for jumping on this is our first one, and we’re really excited to be here. And so we just wanted to thank everybody for their attention and we’re going to continue to execute and chase a really exciting market.

Thank you, Josh. Appreciate you guys joining us today, and we’ll engage with all of you guys over the next quarter. Thank you.