Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tradeweb Markets Inc (TW, Financial) reported record revenues of $449 million for the third quarter, marking a 36.7% year-over-year increase.
- The company achieved significant market share gains, particularly in US Treasuries, where it recorded over 50% market share for the second consecutive quarter.
- Tradeweb's acquisition of ICD has been positively received, with early client feedback being resoundingly positive.
- The company continues to see strong growth in its global swaps business, with revenues up 51% year-over-year.
- Tradeweb's adjusted EBITDA margins expanded by 154 basis points compared to the third quarter of 2023, indicating improved profitability.
Negative Points
- There is increased competition in the credit market, with concerns about how Tradeweb's platform stacks up against competitors like MarketAxess.
- The company faces potential pricing pressure in portfolio trading, with some industry participants offering certain trades for free.
- Tradeweb's expenses have increased significantly, with adjusted expenses rising 30.4% year-over-year, driven by performance-related compensation and new hires.
- The integration of recent acquisitions, such as ICD, presents challenges and requires careful management to ensure seamless integration.
- There is uncertainty in the macroeconomic environment, with fluctuating interest rates and potential impacts on trading volumes and client engagement.
Q & A Highlights
Q: How is Tradeweb's credit platform evolving compared to competitors like MarketAxess, especially in terms of new developments and protocols?
A: Billy Hult, CEO, emphasized that Tradeweb is on a continuous journey of learning and innovation. Over the past few years, Tradeweb has become a market leader in high-grade credit, with significant growth in protocols like RFQ and portfolio trading. The company remains focused on client feedback and enhancing its technology to maintain its competitive edge.
Q: Can you clarify the impact of interest rate changes on Tradeweb's fee per million, and how does this relate to competition in the credit market?
A: Sara Furber, CFO, confirmed that a 100 basis point drop in rates could increase the risk-based fee per million by 5% to 6%. Billy Hult added that Tradeweb's focus is on understanding client needs and leveraging its retail business to gain an advantage in credit. The company is also monitoring developments in private credit markets.
Q: What is Tradeweb's strategy for expense growth and margin expansion over the next few years?
A: Sara Furber explained that Tradeweb's historical expense growth has averaged about 10% annually, with flexibility depending on revenue growth and business investments. The company expects continued margin expansion, albeit slightly more muted due to recent acquisitions and increased occupancy expenses.
Q: How does Tradeweb view the potential for growth in its interest rate swap business, given current market conditions?
A: Billy Hult expressed confidence in the long-term growth potential of the swaps business, noting that only 30% of the market is currently electronified. Tradeweb is focused on further electronifying client flows and onboarding new clients globally. The company is optimistic about the impact of macroeconomic factors on its swaps revenue growth.
Q: With the ICD acquisition now closed, what are the expected contributions to Tradeweb's revenue and earnings, and what are the growth opportunities?
A: Sara Furber highlighted that Tradeweb plans to expand ICD's reach globally and integrate Tradeweb products into ICD's portal. The company sees opportunities to increase demand for money market funds as rates decline, leveraging corporate cash generation and stable demand for liquidity and yield.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
