Q4 2023 Forge Global Holdings Inc Earnings Call

Participants

Lindsay Riddell; Senior Vice President, Head of Global Communications; Forge Global Inc

Kelly Rodriques; Chief Executive Officer; Forge Global Inc

Mark Lee; Chief Financial Officer; Forge Global Inc

Dominic Paschel; Investor Relations; Forge Global Holdings Inc

Devin Ryan; Analyst; JMP Securities

Patrick Moley; Analyst; Piper Sandler

Alex Kramm; Analyst; UBS Financial

Owen Lau; Analyst; Oppenheimer & Co

Michael Cho; Analyst; JPMorgan

Presentation

Operator

Good afternoon. My name is Krista, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Forge Global fourth-quarter and full year 2023 financial results conference call.
On today's Forge Global call will be Kelly Rodriques, Chief Executive Officer; Mark Lee, Chief Financial Officer; and Lindsay Riddell, Executive Vice President of Corporate Marketing and Communication and Dominic Paschel, Senior Vice President of Finance and Investor Relations.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions). Thank you and I will now turn the conference over to Lindsay Riddell. Ms. Riddell, you may begin your conference.

Lindsay Riddell

Thank you, Krista, and thank you all for joining us today for Forge's fourth-quarter and full year 2023 earnings call. This call will be a bit longer as we recap the full year. Joining me today are Kellie Rodriques, Forge's CEO, and Mark Lee, Forge's CFO, who will share for prepared remarks regarding the financial results and then take your questions at the end.
Just after market close today, we issued a press release announcing Forge's fourth-quarter and full year 2023 financial results. A discussion of our results is complementary to the press release which is available on the IR page of our website.
This conference call is being webcast and will be available for replay. There is also a company investor supplemental page on our IR site.
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 can be found on the IR page of our 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 to the IR page.
Today's discussion will focus on the fourth quarter and full year 2023 results. As always, we encourage you to evaluate both annual and quarterly results for a full picture of Forge'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.

Kelly Rodriques

Thank you Lindsay and Dom, and thanks all for joining us. I'll first share some of our 2023 successes, followed by brief highlights of our Q4 results before turning it over to Mark for a deeper dive on our Q4 and annual financials and I'll finish with some insight on the business and what we're seeing in the market.
I'm proud to say that in 2023, we made important moves to invest in forges future vision and our path to profitability, forged focused on three things, accelerating technology development, winning with data and expanding our category leadership.
We invested in 2023 in the forge next generation platform, a flexible and scalable technology platform on which we are building next-generation institutional trading and data tools we developed and tested with key clients forge Pro, our first product combining our automated trading capabilities and our proprietary data and marking the first availability of our global order book for institutional trading customers, all in one powerful platform.
We announced our first two indexes, the fourth Private Market Index, a benchmark for private market performance and a first of its kind investable index for liquidity private market index. And we delivered proprietary and meaningful market data through our products, reports and experts to the tens of thousands who turned to forge for perspective as the market bounced around the bottom throughout the year, amid the volatility that persisted.
Last year, we ran our business with a focus on lean growth and operational efficiency, meeting our targets for lowering cash burn and keeping headcount flat, even as we strategically invested for the future hiring key positions to advance our business.
So I'll now turn to financial highlights for Q4 and for the year. In the fourth quarter, the slow market recovery continued and we grew revenue for the third consecutive period for just total revenue less transaction-based expenses rose to $18.9 million, up 3% from $18.4 million last quarter and up 22% from Q1 2023's trough of $15.5 million for 2023.
For just total revenue, less transaction-based expenses was $69.4 million, marginally up from $68.9 million a year ago. And although the macroeconomic environment drag trading volumes in the first half of the year, we are optimistic that the worst is behind us ahead of a meaningful recovery.
On the market side, total custodial administration fees in 2023 made up the difference and grew 53% to $44 million. Meanwhile, assets under custody were up 5% in the year to $15.6 billion. Our modest improvements in the year reflect the strength of our diversified business model, which includes cyclical and countercyclical revenue streams from our trading business and our custody business, respectively.
We anticipate that as the market continues to improve, we'll see that trend reverse again, and Marketplace revenue will eventually outpace custody revenue.
Now I'll turn it over to Mark to talk about the fourth quarter and annual financials in more detail. And then I'll return with some notable business highlights and for just market COUNCIL.

Mark Lee

Thanks, Kelly. Before I start, I would note that we have renamed the category of our revenue, which was previously called placement fee revenue as marketplace revenue in order to align with the types of revenue included in this category, marketplace revenue includes placement fees, subscription fees earned from our data products and private company solutions revenue.
We believe this name better describes the revenue included therein and therefore is more useful to investors by better characterizing the underlying types of revenue included.
We have not adjusted methodology assumptions or otherwise changed any aspects of placement fee revenue in making this name change to marketplace revenue in this category of revenue remains comparable to prior periods presentation and so with that, in the fourth quarter of 2023 for just total revenue less transaction-based expenses rose to $18.9 million, up 3% from $18.4 million last quarter.
Total marketplace revenues less transaction-based expenses reached $8 million, up 12% from $7.1 million last quarter. Transaction volume increased 7% from $234 million last quarter to $250 million in Q4, while our overall net take rate increased from 3% last quarter, 3.2% in Q4. As a reminder, net take rate fluctuates due to many factors, such as the type of trades, order size and issuer specific supply-and-demand dynamics. In the long run, we believe declines in net take rates.
It will be offset by higher volumes as standardization, automation and efficiency, lower costs and increased trading turnover. Total custodial administration fees were down 3% in Q4 to $10.9 million from $11.3 million last quarter. As we noted on our last call, we fully expect lower interest rates in 2024 to impact total custodial revenues for just custodial cash balances totaled $505 million in Q4, down from $518 million at the end of last quarter.
The decrease in cash balances during Q4 was largely due to cash sorting, which has slowed from the pace in previous quarters. While this is an encouraging sign, we continue to monitor this closely as rate cuts have yet to occur in rates are still at Highland.
Total customer accounts increased approximately 3% quarter over quarter to $2.1 million in Q4, up from $2 million last quarter. Assets under custody increased to $15.6 billion at the end of Q4 from $15.1 billion last quarter. As a reminder, the vast majority of our total accounts and custody are what we call cash accounts or custody as a service. But the main driver of our custody revenues, both cash administration and account fees derived from our core self-directed account.
Fourth quarter net loss was $26.2 million compared to $19 million net loss in the third quarter. This difference is largely explained by a $7.6 million noncash loss in Q4 from the change in fair value of warrant liabilities and cost incurred in connection with legal matters.
Adjusted EBITDA is a key measure of our operating results. In the fourth quarter, adjusted EBITDA loss was greater at $13.6 million compared to a loss of $10.4 million last quarter. This change was largely driven by $2.9 million of costs in connection with legal matters.
Net cash used in operating activities increased to $6.6 million in the quarter compared to net cash used in operating activities of $3.5 million last quarter. As a reminder, both Q2 and Q4 of 2023 had an extra payroll given our biweekly pay cycle and this drove the majority of the increase.
The remainder was driven by net disbursements for other working capital settlements, partially offset by the impact of severance payments made in Q3, cash, cash equivalents and restricted cash ended the quarter at approximately 145.8 million compared to 156.4 million last quarter, highlighting the continued strength of our balance sheet.
This excludes $7.6 million in term deposits classified as other current assets as of the end of the year, which stood at $3.2 million in the third quarter, including these term deposits as cash, our total cash stands at 53.4 million.
Now to recap the full year of 2023 in fiscal year 2023 for just total revenue less transaction basis, base expenses was 69.4 million, slightly up from $68.9 million a year ago. There was a significant change in the mix of our revenue portfolio between marketplace revenues and custodial and administration fees. Total marketplace revenues less transaction base expenses totaled $25.4 million, down from $40.2 million last year.
2023 trading volume was down 37% to $766 million compared to $1.2 billion in 2022. The average net take rate for 2023 stayed constant with 2022 at 3.3%, while year-over-year results reflected the difficult market conditions during 2023, which included additional rate increases and banking crisis and continued geopolitical unrest we are nonetheless encouraged by the steady and consistent improvement seen in our marketplace business.
Since Q1 of 2023, total custodial administration fees were up 53% in 2023 to $44 million from $28.7 million in 2022. Total custody accounts increased year over year to $2.1 million from $1.9 million. The growth in accounts came from our cash or capacity as a service business for just custodial. Cash balances totaled $505 million at the end of 2023, down from $635 million at the end of 2022. This was largely driven by cash sorting assets under custody ended 2023 up 5% year over year to $15.6 billion from $14.9 billion at the end of 2022.
As we've explained, throughout 2022 and 2023 higher interest rates resulted in higher cash administration fees. These fees have been the main driver to the growth in total custody revenues as we head into 2024, we expect to generate lower cash administration fees based on lower cash balances and lower interest rates, resulting in lower total custody revenue.
Full year net loss was $91.5 million in 2023, an improvement of 20.4 million from the net loss of one 11.9 million last year. Please note that 2022 included significant one-time transaction costs related to going public.
As disclosed in our investor supplemental and in the 10 K fiscal year 2023 adjusted EBITDA loss was 48.8 million compared to an adjusted EBITDA loss of $46.9 million in 2020 to forged capitalized software in the amount of $6.7 million in 2022, 2023 included a 2.2 million charge in connection with the previously mentioned legal matters during 2023, Forge continued to make key hires to drive our strategic initiatives, as described earlier by Kelly, while maintaining tight cost discipline, keeping total headcount flat and bringing down our total spend.
Net cash used in operating activities was $41.5 million in the year, a $27.4 million improvement compared to net cash used in operating activities of $68.8 million in 2022, excluding $14 million in 2022, costs related to going public.
Significant cost saves were made across the board, including incentive compensation, company liability, insurance, marketing spend professional fees and real estate consolidation. Keep in mind for the timing of cash flows that Forge pays out annual corporate bonuses in the first quarter, our total headcount, including Forge Europe stayed relatively flat at 345 at the end of the year from 349 in 2022 for Europe continues to staff up with eight people at year end.
We continue to be very disciplined about managing costs, and we have maintained our overall hiring freeze. From a housekeeping perspective, our weighted average basic number of shares used to compute net loss was $173 million shares. And our fully diluted outstanding share count as of December 31st, 2023 was $199 million shares.
For the first quarter of 2024. We estimate $180 million weighted average basic common shares for EPS modeling purposes, we are in a loss position. We continue to focus on managing our expenses while still investing in our top strategic priorities to continue to build and improve for just platform products and services the launch of forge Pro for Europe and the force private market index are just the most recent examples of our traction as the stewards of our shareholders' capital.
We are committed to continuing to lower our overall cash burn in 2024 as we did in 2023 entering 2024, we see early signs that the private markets are starting to regain their footing, and we're feeling optimistic about our prospects for the year ahead.
I'll hand it over to Kelly to further expand on this.

Kelly Rodriques

Thanks, Mark. At the beginning of 2023, we've talked about how to put ourselves in a position to win in this market. Importantly, we focused on continuing to build the Ford's next-generation private market platform to drive the market's evolution and to expose more participants to the high quality data that will tie them to forge and more deeply engage them in this asset class.
We believe the forge Pro, which we announced to the public last week, represents a step change toward that goal is also forges definitive stake in the ground that we intend to win the institutional market and believe that with our tech, our data and our expertise, we are best positioned to do so.
We also made strategic moves to win on data and identify data quality as a key differentiator for us because of our commitment to building long-term company relationships. We match trades at a high rate, but we also closed more than 90% of matched trades in 2023. The scale and quality of our data is a key to this execution. And what became clear over the last year is that the more access people have to 4G data, the more likely they are to engage meaningfully in this emerging asset class.
So in 2023, we made changes to our data strategy aimed at maximizing adoption of an exposure to our data through our products and platform. These changes mean we are prioritizing data adoption over near term data revenue and creating stickier relationships with our customers that we believe will drive higher lifetime value reflecting this transition.
Total bookings in 2023 were 1.3 million, up slightly from 1.2 million in 2022. And we've seen positive signals to start the year in terms of an increased number of IS. from investors exposed to our pricing data to continue to expand our leadership position in the category, we made significant steps to invest in the right talent in 2023.
Through this acquisition of talent, we made scaled improvements to many functions including how we engage issuers and institutional customers and how quickly and effectively we bring new product innovations to market. And we continue to build out our Ford Europe team as we pursue the BaFin license in Germany.
While we had hoped for a more meaningful market recover in 2023, we believe we emerged a stronger, more efficient company and that the progress we made on technology data and category leadership will pay dividends this year.
Today, we're also nearly one quarter through 2024, and I can tell you with confidence things are looking up, there are few signals that we are monitoring closely by sight indications of interest on our platform outweighed cell site indications of interest for the first time in two years in February, bid-ask spread has jumped around month to month as new issuers emerge and buyers reengage, but it settled down to under 11% in February.
And before the private market index turned positive year to date with a growing number of outperformers amongst our index names. Reading the headlines, there's growing optimism for our returning IPO market this year, whether or not the IPO pipeline opens up meaningfully from our view.
There's an energy in this market that we haven't felt for a long time given what we're seeing in the market now momentum is building, and we're seeing increased buy-side activity and a growing pipeline. While I've warned that the recovery may not be linear or up into the right every quarter as the market comes out of this long winter. We're feeling optimistic about the spring.
Thank you for joining us. We'll open it up for questions.

Question and Answer Session

Operator

Thank you.
(Operator Instructions) And your first question comes from the line of Devin Ryan from Citizens JMP. Please go ahead.

Devin Ryan

Hey, thanks.
Good afternoon, everyone. Thanks for taking the questions here. On your first one, just want to talk about the bid-ask spreads. And I tell you just made on the improvement you've seen there in kind of your sub 11% in February that's coming down from, I think, 15% at the end of the third quarter and going back to some of the data, you guys provided the medians been 11.6% from 2020 and then in some really strong periods in 2021, you were sub 5%. So just want to think about like what your 10.8% needs and indicates and like do we need to see further improvement to really see people reengaged, we need to get back down into that mid single digit range.
And then that's kind of part one of the question. The part two is, you know, it does take time to kind of rev the engine back up here, particularly given that it's been slow for the last two years. And so what does that lag look like in your guys' mind in terms of people reengaging And then from that period to actually get to a point where deals are closing and your revenues are coming in or maybe said a different way accelerating banks?

Kelly Rodriques

Yes. So I'll start with part one, and I'll let Mark take part two. And we've been talking about bid-ask spreads for for two years. And I think it's interesting.
Your question refers to what the spreads look like in 2021, which was Uhm-hmm, which is really an extraordinary moment in the market. When I look back on the data, I'd say in the sort of zone of nine to 11, the market starts to feel normal again. And when I say normal, that you've got a reasonable range. We're trading, it can happen and buyers and sellers can meet. And this is true by looking back at the 2020 bid-ask spreads. So I'd say the second question is probably have more of a forward-looking view about how quickly revenue will accelerate. And I'll let I'll let Mark take it.
I just I just want to point out that in the zone that we're in right now. This is what we feel starts to look like a more healthy market than we've seen in the last two years. So we're pretty we're pretty excited about that.

Mark Lee

Yes, Devin, thanks for the question. So let me give you a little bit of kind of a lengthy response. I mean, as you point out, we had seen kind of the spreads fluctuating between 5% and 10% even going back to 2020. And so I think it's sort of fair to say, obviously, the tighter the spreads, the better. But I think we feel pretty good about kind of where the spreads are now and our ability to increase volume and flow with spreads kind of where they are today and the direction that they're heading in.
I mean, the way I would broaden the answer is I mean, we share with you two leading indicators, bid bids and offers. And as Kelly indicated, we saw the bids outnumber the offers in the more recent period of 52% of our eyes, you know, now bids versus offers and that's a big change kind of from where we were. You remember two thirds sellers and one-third buyers. You know, during the last two years, I think the other the two leading indicators, therefore, are kind of bid offers and spread. But we also provide you guys a lagging indicators, the valuation and of these private companies, and we're seeing improvement there, right.
And so these come from our PMU and our forge investment outlook. But we're seeing the median valuation of the companies that we're trading. It traded at 50% discount to their last round. But on the high end, these numbers are getting better. The top decile are trading at a 75% premium to the last round, whereas the bottom decile are trading at a 77% discount to the last round. But all those numbers on our ROE improvement over what we've seen before.
And then if you kind of go online and look at forge.com and you track the forge private market index performance. You can see as Kelly referred, we are index turned positive in 2024. So our index is now up 4% year to date through 2024. And that's a big change, right? If you recall, in 2023, the 40 private American Index was down 20% in contrast to how well the public markets performed.
So we still think this gap between private company valuations and public company valuations is another reason feel good that perhaps in fact, this could turn out to be a very strong vintage year from a investing and private company in our perspective. And we think all of that together kind of forms the foundation for how we're feeling about the market going forward.

Devin Ryan

Got it. Okay. Thank you, guys so much for the detailed answer there. Great color. Just a quick follow-up.
I guess probably quick. So great to see the continued rollout of some of these new offerings. The recent announcement around Ford Pro love to just drill down a little bit into that specifically and just kind of think about how that's going to be marketed? And is that something that's going to come with the data subscription or it's intertwined with that to their kind cross opportunities there? And then is this something that's going to be a direct monetization opportunities? Or is this more just around growing the pie, the differentiation of the platform and creating a better experience to drive more growth and activity? I'm just trying to think about what this means for you guys. Thanks.

Kelly Rodriques

Yes, look, it's a pretty big deal for us and clearly, we have been working on it for a while.
Mark, I'll give a little bit of color on on sort of traction so far. I guess when we look at our business model, and I've been talking about subscription base or data driven revenues for a few years. This really represents a combination of two really powerful things.
First of all, we talked about the quality of data and the fact that we run a platform where we can verify the quality of IO wise and obviously substantiate pricing through the platform. But when you combine that data with some of the automated trading capabilities and access to our global interest book, which we've not opened up for anyone else up to this point, this is a pretty major moment.
Now we see this continuing along the path of a subscription-based model.
So think of it as another dimension of how we sell our recurring revenue data product. But it's really targeting institutions that trade.
So the combination of the global order book and that data quality, we think is the game changer for us. It's still early days. I'll let Mark speak to sort of where we are, but we're pretty we're pretty excited about this. And obviously, my points earlier about the relationship between data and trading. We see and have a belief that that benefits forge in that sort of network effect.
But Mark, I'll let you take it from there.

Mark Lee

Yes, let me let me expand a little bit on that. So I mean, we all know when we rolled out four and forge intelligence, people could see trading data, our order book, VW, a waterfall models, mutual fund data, pharma graphic inflammation. So that was kind of a version one data will now be talked about forge Pro. Really, we really think this is important because it's our first step towards order and execution management technology and capabilities for our institutional trading customers. It specifically gives our customers the ability to input their eyes with full visibility to live real time and visibility to our global global order book. And so they can put in their orders, they can track the order status.
You know, it gives them full depth of market in an institutional style view. So we really think that this is kind of the first step of really improving the and customer experience and the automation of the entire process.
I think we've also talked about this that that as we see the evolution for our data business, we really break it down into kind of three distinct segments where you have our institutional trading clients where we are looking to bundle our training and data services, Tom add so so that they can take advantage of kind of the full basket of them.
The information and the services that we can provide provide number to those that are not trading clients. We see a business where we're getting subscriptions to forge intelligence.
And then number three, you've heard us talk about this a lot drive data, right? And referring specifically to our index products and forge price. And that, of course, we think there's a lot of opportunity. We've talked about the forge private market index now the investable index. So you think about our data world in those three different categories.

Devin Ryan

That's great. Okay. I'll leave it there. Thank you, guys.

Operator

Patrick Moley, Piper Sandler.

Patrick Moley

Yes, hi, guys. Good evening. So yes, I would looking back a few years now when you went public. I think one of the things that you had identified was that the TAM, I think in 2021 was around $3 billion. You thought that could grow to around 8 billion by by 2026.
So I mean, obviously, we've hit a little bit of a cyclical downturn here. But just wondering if you still think that if we do get it taking the market, do you still think 8 billion is kind of a reasonable plan for 2026? And if so, what are maybe some of the things that we've seen since And 2021, that would kind of indicate that we could see that kind of spring-loaded acceleration.

Mark Lee

Yes. Hey, Patrick, this is Mark. Yes, so I think that we'll have to probably come back and refresh kind of our TAM with you more directly. But he said, here's how I think we think about it right back in 2021, we looked at roughly 1,200 private companies across Canada across the world with maybe a four, $4 trillion market cap.
And I think at this point now you look at kind of what's happened since 2021. There's there's it's just still roughly that number of unicorns. Obviously, the market cap of these unicorns have had hit a snag in the last two years. And so but we still fundamentally believe that in the long run, it's that these are again, I mean, our whole thesis, right?
These are the most innovative companies in the world. We continue to see new unicorns emerge globally, right? We're seeing a lot of activity in Ford, Europe and in Asia. And so I think I think our thesis remains the same and our TAM.
We have an updated number that we've dropped that 8 billion down to 7 billion. I think based on the kind of the most recent information, but I think our fundamental thesis remains the same. You know, as we talked about back in 2021 on the anything you want to add to that, Kelly?

Kelly Rodriques

No, no. I think there's still some very large macro trends that will continue to make it attractive for companies around the world to stay private longer. And we see that emerging with Navy four or five year lag in Europe. But we see this trend remaining obviously for in a bit of a cycle turn now.
And we've believed for a while that the longer-term opportunities there and we felt making the investments while others couldn't makes this a pretty important time. So we're really proud looking back on what we've built in 22 and 23 to come out of this with the right kind of tech and the right kind of reputation and data. So we're excited.

Mark Lee

Patrick, the one thing I think I would add is I think the difficulty of the last two years, which are affected, really everybody in this space, I think disproportionately affected our competitors. So oddly enough, I actually think that we come out going into 2024 in almost a stronger competitive position relative to the other players in this space.
We still believe fundamentally there is going to be consolidation. And especially after the experience of the last two years, we're convinced that will happen and you'll start to see that and you'll start to see we've always believed that this is a business for which you'll eventually see, you know, a few major players. And I think I think the last two years is kind of increased our conviction in that belief.

Patrick Moley

All right. Great. Great color. And maybe just a follow-up. If we think about expenses, you did a good job keeping the head count flat in 2023. I think I heard Mark say that you were expecting to kind of keep keep that hiring freeze in effect, but you maybe indicated that you could look to hire more people in Europe.
So can you just maybe talk about what you expect the headcount growth to look like in 2024? And then maybe what that looks like in Europe versus versus the US business?

Mark Lee

Yes, Patrick, we as I said, I mean, we're still maintaining flat headcount. And in fact, the numbers that I shared, we basically funded our headcount growth in Europe which went from two people at the end of 23 to eight people at the end of sorry, two people at the end of 22 to eight people at the end of 23 and continuing to grow and invest in Europe, we basically managed to keep our total head count flat while continuing to invest in Europe.
And so that's our view still, right. I mean, as you can tell from a lot of the commentary, we do think that 2024 is a very different year as we start off the year with no rate cuts are coming right. We can see that glimmer of IPOs starting to come back to the market. Obviously, the kind of recent experience with Estorra and read it, and we're very positive for the market.
Other big names being talked about rubric, Stripe, Plaid, Fanatics, way Star. I mean, it sounds like people are starting to feel good about IPOs maybe in the second half of 2024.
So I do think that I do think that kind of IPOs coming back to great reset of private companies, raising capital even when they're having to take a down round, I think that pace is expanding and I think all of those things will help. So our focus is on continuing to manage that balance.
It's between investing in our business as we've been doing rolling out new products while keeping our costs very lean and to really reduce our burn through top line growth All right.

Patrick Moley

Thanks so much, guys.

Operator

Alex Kramm, UBS Financial.

Alex Kramm

Yes, hi. Good evening, everyone. Um, maybe following up on a couple of the things I've already discussed. Just hoping that we can be a little bit more specific. I mean, on the on the trading side, I mean, you gave a lot of good color on what you see in terms of IOIs and spreads, et cetera, but look where like two more days in the quarter.
So hoping maybe you can be a little bit more specific in terms of the volumes that you're seeing. If you don't want to give exact numbers, maybe at least directionally or directionally with some magnitude of how we're trending so far in the first quarter? I mean, again, the quarter is almost over. Thank you.

Kelly Rodriques

Yes.
So Alex, it's Kelly. I think we we've we've made the decision to stay away from from providing detailed color. And I was pretty deliberate in some of the terms that I used there, which is we are seeing the market improve and we are seeing an indication that while we've benefited in some ways from the interest rate environment around our custody business, we're starting to see a shift.
You could see it in the Q4 numbers regarding the growth in volume that we saw in Q4, and we see that trend continuing in 2024 around what Mark described as the Marketplace business. I think the only caution that I that I want to reiterate is that there is a certain level of quarter-over-quarter variability in terms of how the market works between the end of the year and the first part of the next year, I'd say we're very confident in the pipeline and the pipeline has improved.
And I think we'd rather not I'll talk about where we're going to be a key one. I have in the past quarters, talked about being at or above in the successive quarters as we move through time. And I'd say I'll leave it that we're optimistic in the pipeline and continued recovery.

Mark Lee

But and it's clear to us that it continues to recover at a point where we can't commit to every quarter being up into the right from the previous one payout, Alex, and I would add that them as you're tracking a lot of these other leading indicators in the PMU. and the FAO that as you know, from our prior conversations, there's improvement in sentiment and in these indicators, but there's always a lag between the time that people start to know and regain their confidence to invest in the time it takes to settle and close transactions, right?
That's the 30 to 45 day window typically in the private markets. And so on the end, there's always generally a big push at year end. A lot of institutions want to kind of get certain trades in before the end of the year. And so that always happens every year where Q4 there's a big push and then you start off the year fresh. So I think that's yes, I think I think I would leave it at that.

Alex Kramm

No, very, very clear. Thanks. Thanks for that color. And then again, sorry to be numbers focused here, but I question around expenses. Maybe you can be a little bit more specific as well. I mean, I hear you and head count flat and that's great. When I look at I mean, it's great from expense control. Hopefully you're still investing enough but in terms of the expense growth and in total, I mean, it's been basically flat. The way I look at it is basically revenue minus adjusted EBITDA, which I think was one, 18 and 2023 and was basically flat for the last three years.
So look, there's an inflationary environment. There's other costs that you have. Would you think in dollar terms you do you want to keep the expenses flat as well? Or is there actually a scenario where things improve that and overall expenses start ramping up a little bit? So just in terms of the expectations we should be having initially here? Thanks.

Mark Lee

Yes, Alex. Look, I think I think the what's what's what I'll make very clear, well, let me back up when we talk about adjusted EBITDA year to year, we were very specific to identify that when you look and compare our adjusted EBITDA year to year, just please consider that we did capitalized software in 2022, and we have have had legal expenses associated with 2023.
And so we called those out specifically. So you can kind of get a better idea of how to look and gauge, as you know, on an apples to apples basis, by the way, the way we we think about it, we're very clear that we are committed to and our investors it to our shareholders to our Board that we are going to be reducing burn year over year, right?
And we look at it as trying to manage our costs while while growing the top line, right and taking that revenue growth while continuing to invest but reducing burn. So that's how we're thinking about the world right now.
I mean, we've pointed out historically that this has always been a company that we've operated to be roughly breakeven, right kind of operating in the last two years. Of deficit is not kind of in our DNA in terms of how we think about managing this company.
So one of our top priorities really is to get that number down to kind of where we've been in the past. And but but at the same time, continuing to do that to gain traction on all the announcements that we've talked about in the last several years rate has been that delicate balancing act.

Alex Kramm

You have remained a little sluggish.

Kelly Rodriques

So I want to make sure you hear this though. We we are we are looking at our path to profitability. Now we understand that as a public company that there's an expectation, but we're not going to we're not going to burn forever and our commitment two years ago was to systematically reduce burden each year. And I'd say, as we get through part of 2024, we're going to look at this and we're going to obviously be looking at what are the other scale drivers beyond just our organic growth and cost controls.
One of the reasons we went public was to use our currency to consolidate other interesting, some players in the market. We view 2024 and the continued improvement and opportunity for us to look at other inorganic ways to get additional scale. And that's part of the calculus for how we see our path to profitability, including organic growth and these cost controls.
But under all circumstances, we're reducing burn in 2024. I want to make that really clear with Mark on this.

Alex Kramm

So clear. Thanks, guys.

Operator

Owen Lau, Oppenheimer.

Owen Lau

Good evening. Thank you for taking my question. So a follow-up question related to the outlook and new products. How should investors think about or even model out the revenue impact from some of the initiatives by Ford Pro forge new world and forge intelligence in 2024? And is there any way you can help us get our arms around these numbers? Thanks a lot.

Kelly Rodriques

Yes, let me let me start with just a couple of broad base points from. We've just started our initial trades in Europe. Mark will talk a little bit more about some of the some of the specific modeling guidance.
And I'd say you should think of forge Pro, as I said earlier, as a subscription product that's meant to be driving revenue that would be in our marketplace revenue line as subscription with subscription revenue, but also as a bundling component with our with transactional revenue. And we think that it's an evolution of the market as we see it.
And then I say, Mark, you can you can jump in and talk a little bit more about any of the other new products ranging from the index and the investable index as we see it and how it's contribution, it should be considered as well.

Mark Lee

Yes, nd so silicon, Porsche Pro, as you know, kind of Kellie has described and I mentioned earlier, I mean, we see it as a product where where the trading capability state of the art trading capability combined with data, you know, is you know, kind of completes and creates this this experience for our customers, which will be superior to anything else kind of out there in the market and that the way we'll roll out the product, the way we price the product, it will be, you know, done as a as a bundled product.
And one of the things we've mentioned in the past is that when we first rolled out 4G intelligence and we measure this some time ago that we saw an uptick right in our customers' engagement with forge from a trading perspective, right.
And so I actually think that beyond the subscription revenue that we're talking about for the data product itself, a lot of the upside right, is in creating that stickier relationship that with the with our institutional customers. And that will result in higher revenues, not just through subscription revenues, but higher trading revenues as well.
So with Ford Europe, I mean, we're really excited about about the opportunity there. I mean, the team is growing. As Kelly said, we've started to do some trades. We have the ability to trade as a tied agent through registered entities in each jurisdiction as we await approval by BaFin. But the team is out there talking to private companies, they're talking to institutional investors, right?
We're getting indications of interest. And we just think it's an incredible opportunity where there's we don't really have and have competitors to speak up on the ground, but it will take time, right. I think that as you model it, you have to kind of build it out over time?
I think ultimately, right. We talked about cross-border flows across Europe, Asia and the U.S., but but it's going to take time to mature and evolve. I think the other thing we wanted to mention is and the forge private market index. So as we have announced, we've created a partnership with liquidity and the liquidity mega corn fund, we'll start to track the forge liquidity private market index on April the first. So as we said earlier, this will be an investable index.
We're really excited about it. Again. It's something that we think will take time, but to have a but to have to give investors the opportunity to invest in the private markets in a passive manner, right, complementary to active investing in private markets. I think we think it's a game changer in the long run, but again, will take will take time to mature and build and build scale. But but that's something that we feel I'm very excited about as well.

Owen Lau

Got it.
And then just a quick follow-up. Housekeeping question could you please add more color on the 2.5 million increase in the accrued legal expenses related to a settlement? And also I also saw another CAD3.8 million loss related to change in fair value of your bond warrant liabilities. I just want to make sure I understand these numbers correctly. So I assume they are nonrecurring in nature or is there anything we should be aware of?
Thanks.

Mark Lee

Yes, Owen, I think there's a fair amount of information about this in the 10 K as we have talked about, we have provided information. We did have we did have warrants private warrants kind of as we went public. We did have legacy warrants and the lawsuit and revolve around around those.
Those private warrants. We've mentioned in prior calls that, you know, a lot of this is non-cash and yet it's an expense as a legal settlement and a cost you have to include in G&A in your adjusted EBITDA.
So I think there's a it is a one-time related to that particular matters, a one-time kind of related to the acquisition of shares, both back in 2020. I mean the warrant mark-to-market in general, obviously, which was a pretty significant number this quarter. I mean, it's related to the increased value of these warrants based on the stock price. And as you recall, I mean, the stock price, you know, got up into the threes and even approached $4 at the end of the year. And so a lot of that mark-to-market is driven by the increase in the stock price back at the end of the year.

Owen Lau

Got it. Thanks a lot.

Operator

Ken Worthington, JPMorgan.

Michael Cho

Hi, good afternoon, Kelly and Mark. This is Michael Cho in for Ken. Thanks for taking the question.
I just had a couple of quick follow-ups on the discussion we've been having, I guess just one on the on the data business. I think Kelly, and you've certainly announced the number on your good and forward-leaning initiatives around this business.
And it seems like a big, a good path forward here with the launch of forged products well, supported by the data. But I guess I'll tell you, I think I heard a comment when kind of a shift in the data business strategy and you talked about kind of prioritizing some adoption or overall kind of near term revenues. I guess one is, is that is that a kind of a short term strategy that you've taken in terms of positioning the data business?
And two, is there like is there a point in which you will start to prioritize revenue again in the data business? And again, just trying to gauge if there's a tipping point at all or if this is a clear shift in strategy that's implemented for the medium term, I guess you should mark Mark Read into it as our strategy for 2024.

Kelly Rodriques

I'd say we're at a point right now where we see an advantage in the quality of our data. We think it's unique in the market. You've got a bunch of competitors out there that are aggregating third-party data that they don't own and that you could question the validity and quality of it.
And we think that not only is it time for us to dimensionalize data from just a subscription product, but into a trading product like Pro that we've got an opportunity to make a pretty significant ramp for market share right now.
And we need 2024 is the right time to do that. And we'll do that through a combination of bundling pricing strategies and essentially being really aggressive and getting our data out it to as many customers and prospective customers.
As we can say you and the other folks on the call should continue to watch for where you see Ford data appear because beyond forge Pro, our strategy for adoption and exposure will extend beyond just what we're going to market with and into a range of other activities that will play out over the course of the year, but this is at very least a 2024 strategy.
And we believe, given the quality of it, it's really valuable to the relationship between those who trade and those that we do business with on the institutional side. So that doesn't mean revenue is always going to be a priority, Mike, and we certainly want to see it translate into revenue.
We just happen to believe this strategy here. We'll translate particularly positively for forge given the scale of our marketplace business.
So considered a 2024 strategy and if we come back and decide to shifted and be more focused on revenue in follow-on quarters this year, we'll come back and let that be known to the to the investor community as we see fit market.

Michael Cho

Thanks for the color, guys.

Mark Lee

Michael, I was just going to say I mean, when you think about institutional customers who you know, are getting increasingly reactive in the private markets is there and you think about and of the size of trades and you think about the take rates that we charge, you can understand that we also have to be thoughtful about how we want to price the bundling of data and trading because obviously there's just huge upside to be able to, you know, get dominant market share a customer's trading activity, right and says.
So it's considering considering both. And then that's why we've kind of talked about having a strategy to bundle bundle the two together. I think I think the combination of trading plus data is just kind of the winning combo is you now in terms of positioning ourselves, you know, with our customers relative to competitors.

Michael Cho

And now that makes sense, and I appreciate all the color there. And just a quick follow-up on M&A. I think, Kelly, I heard you say our discussion kind of maybe areas for potentially more accelerated scale in the business and maybe that could get plugged with M&A or considerations when they come to get them?
Because my question is, you know, are there some areas or segments of the business for all of the markets that seem of higher interest due today? Banks?

Kelly Rodriques

I don't think we're ready yet to talk about it but I think what you could assert from the priorities that we've laid out around institutional, what we call data domination and issuer centric, some relationships we're looking at and a differentiated player that's got scale that have an aligned focus in the areas of our priorities.
And so when we talked about the launch of Pro that really lines up under our institutional focus. So anybody that's out in the business that operates with a high level of integrity focused on institutions is interesting to us.
Anybody that's out in the business that's got scale that are focused on issuers and reputationally are in a good position with issuers. That's interesting to us and clearly high-quality sources of data where the data is proprietary and owned by a potential competitor are areas that all line up to our priorities for 2024. But we don't have anything for anybody specifically, and we're ready to talk about.

Michael Cho

Yes. Okay. Great. Thank you.

Operator

And we have no further questions in our queue at this time. I will now turn the call back over to Dominic Paschel for closing remarks.
Great.

Dominic Paschel

Thank you guys for joining us for this year and calls a bit longer. We are available for questions just being ir@forgeglobal.com, and we will definitely Engage concurred with this.

Operator

This concludes today's conference call. Thank you for your participation, and you may now disconnect.