Tradeweb(TW) - 2025 Q2 - Quarterly Results

Tradeweb Q2 2025 Earnings Release Financial Highlights The company reported strong Q2 2025 results with significant growth in revenue, net income, and trading volume Q2 2025 Key Metrics | Metric | Q2 2025 | YoY Change | Constant Currency YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $513.0M | +26.7% | +24.7% | | International Revenues | $215.2M | +40.8% | +35.8% | | Average Daily Volume (ADV) | $2.6T | +32.7% | N/A | | Net Income | $175.5M | +28.7% | N/A | | Adjusted Net Income | $206.1M | +23.7% | N/A | | Adjusted EBITDA Margin | 54.2% | +70 bps | N/A | | Diluted EPS | $0.71 | +29.1% | N/A | | Adjusted Diluted EPS | $0.87 | +24.3% | N/A | | Quarterly Cash Dividend | $0.12/share | +20.0% | N/A | - The company achieved record quarterly Average Daily Volume (ADV) in several key areas, including U.S. government bonds, U.S. swaps/swaptions < 1-year, fully electronic U.S. high yield credit, municipal bonds, European ETFs, and global repurchase agreements[2] CEO Commentary and Business Update The CEO highlighted strong performance, strategic AI and digital asset initiatives, and innovative product launches - The company is actively pursuing strategic initiatives in both traditional markets and the digital asset space[4] - Tradeweb appointed Sherry Marcus as Head of AI to advance the company's capabilities in artificial intelligence[4] - New product innovations were launched, including direct Treasury bill trading for corporate treasurers and electronic portfolio trading for European government bonds[5] Detailed Financial and Operating Performance Broad-based growth across all asset classes drove strong financial results, though operating expenses also rose Overall Financial Results Summary Q2 2025 results show significant YoY growth in revenue, net income, and adjusted EBITDA margin GAAP Financial Measures | GAAP Financial Measures | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $512,971K | $404,951K | 26.7% | | Net Income | $175,522K | $136,416K | 28.7% | | Diluted EPS | $0.71 | $0.55 | 29.1% | | Net Income Margin | 34.2% | 33.7% | +53 bps | Non-GAAP Financial Measures | Non-GAAP Financial Measures | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $277,896K | $216,533K | 28.3% | | Adjusted EBITDA Margin | 54.2% | 53.5% | +70 bps | | Adjusted Net Income | $206,149K | $166,711K | 23.7% | | Adjusted Diluted EPS | $0.87 | $0.70 | 24.3% | Segment Performance Analysis All business segments, particularly Money Markets and Equities, reported strong double-digit revenue growth - Rates: Revenue grew 26.2% to $274.5M, with ADV up 15.5%, driven by record ADV in U.S. government bonds and swaps/swaptions < 1-year[9] - Credit: Revenue increased 11.7% to $124.3M, supported by a 16.2% rise in U.S. credit ADV and record fully electronic U.S. high yield credit trading[10] - Equities: Revenue rose 49.8% to $34.3M, with ADV up 29.6%, driven by strong growth in equity derivatives and record ADV in European ETFs[11] - Money Markets: Revenue surged 130.7% to $41.6M, and ADV was up 67.5%, primarily driven by the acquisition of ICD and record activity in global repurchase agreements[12] Operating Expense Analysis Operating expenses increased due to higher performance-based compensation, FX losses, and acquisition-related costs - GAAP Operating Expenses increased 29.1% YoY to $313.1 million[15] - Adjusted Expenses increased 24.1% YoY to $252.6 million[16] - Key drivers for the expense increase include higher employee compensation, a $14.6 million rise in foreign exchange losses, and increased depreciation and amortization from the 2024 acquisition of ICD[15][16] Recent Business Highlights The company advanced strategic initiatives in digital assets, AI, and product innovation while earning workplace awards - Co-led a $135 million strategic fundraising round for Digital Asset, the company behind the Canton Network blockchain[18] - Introduced direct U.S. Treasury bill (T-bill) trading for corporate treasurers and electronic portfolio trading for European government bonds[18] - Appointed Sherry Marcus as Head of Artificial Intelligence and collaborated with Novaprime to offer new mortgage risk-hedging solutions[18] - Recognized with multiple awards, including 'Best Companies to Work For' by U.S. News & World Report[19] Capital Management and Shareholder Returns The company maintains a strong capital position, grew free cash flow, and increased its quarterly dividend by 20% - Held $1.6 billion in cash and cash equivalents with an additional undrawn $500 million credit facility as of June 30, 2025[26] - Trailing twelve months free cash flow grew 31.9% YoY to $951.7 million[26] - The Board declared a quarterly cash dividend of $0.12 per share, a 20.0% increase YoY[2][26] - As of June 30, 2025, $179.9 million remained available under the share repurchase program, with no shares repurchased during Q2 2025[26] Updated Full-Year 2025 Guidance Full-year 2025 adjusted expense guidance was revised upward to reflect strong momentum and accelerated investments FY 2025 Guidance | FY 2025 Guidance Metric | Updated Guidance | Status | | :--- | :--- | :--- | | Adjusted Expenses | $1,000 - $1,050 million | Revised Up | | Acquisition & Refinitiv D&A | $176 million | Unchanged | | Assumed non-GAAP tax rate | ~24.5% - 25.5% | Unchanged | | CapEx & Capitalized Software | ~$99 - 109 million | Unchanged | | LSEG Market Data Contract Revenue | ~$90 million | Unchanged | - The increase in adjusted expense guidance is due to strong business momentum and accelerated investments in future growth initiatives[21] Consolidated Financial Statements The unaudited statements detail financial performance for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Income The income statement reflects significant year-over-year growth in revenue, operating income, and net income for Q2 Consolidated Statements of Income | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Revenue | $512,971 | $404,951 | | Total Expenses | $313,118 | $242,457 | | Operating Income | $199,853 | $162,494 | | Income Before Taxes | $227,061 | $183,463 | | Net Income | $175,522 | $136,416 | | Net Income Attributable to Tradeweb | $153,782 | $119,239 | | Diluted EPS | $0.71 | $0.55 | Non-GAAP Financial Measures and Reconciliations This section provides reconciliations of GAAP to non-GAAP measures to clarify core operating performance Reconciliation to Adjusted EBITDA and Adjusted EBIT Net income is reconciled to Adjusted EBITDA and Adjusted EBIT, showing strong YoY growth in both non-GAAP metrics Reconciliation of Net Income | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Income | $175,522 | $136,416 | | Add: Provision for income taxes | $51,539 | $47,047 | | Add: Depreciation and amortization | $63,048 | $49,936 | | Add: Interest expense | $429 | $542 | | Less: Interest income | ($14,972) | ($21,511) | | Other Adjustments | $2,030 | $3,650 | | Adjusted EBITDA | $277,896 | $216,533 | | Adjusted EBIT | $260,322 | $201,312 | Reconciliation to Adjusted Net Income and Adjusted Diluted EPS Adjusted Net Income and Adjusted Diluted EPS both increased over 23% after accounting for non-core items Reconciliation of Net Income | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Income | $175,522 | $136,416 | | Pre-tax Adjustments | $37,804 | $38,818 | | Adjusted Net Income before taxes | $274,865 | $222,281 | | Adjusted income taxes | ($68,716) | ($55,570) | | Adjusted Net Income | $206,149 | $166,711 | | Adjusted Diluted EPS | $0.87 | $0.70 | Reconciliation of Operating Expenses to Adjusted Expenses GAAP operating expenses were reconciled to Adjusted Expenses by removing acquisition-related costs and FX losses Reconciliation of Operating Expenses | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating expenses | $313,118 | $242,457 | | Less: M&A costs | ($3,772) | ($3,650) | | Less: D&A related to acquisitions | ($45,474) | ($34,715) | | Less: Stock-based comp expense | ($601) | ($531) | | Less: Foreign exchange losses | ($10,622) | $78 | | Adjusted Expenses | $252,649 | $203,639 | Reconciliation to Free Cash Flow Trailing twelve-month Free Cash Flow increased significantly, driven by higher cash flow from operating activities Reconciliation of Cash Flow | (in thousands) | Trailing Twelve Months Ended June 30, 2025 | Trailing Twelve Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash flow from operating activities | $1,043,551 | $785,734 | | Less: Capitalization of software development | ($55,195) | ($45,208) | | Less: Purchases of furniture, equipment, etc. | ($36,653) | ($18,780) | | Free Cash Flow | $951,703 | $721,746 | Supplemental Financial and Operating Data This section provides a detailed breakdown of revenues, average variable fees, and average daily trading volumes Revenues by Asset Class Total revenues were driven by strong growth in both variable fees and fixed fees across all asset classes Q2 2025 Revenues by Type | Q2 2025 Revenues (in thousands) | Variable | Fixed | Total | | :--- | :--- | :--- | :--- | | Rates | $204,743 | $69,774 | $274,517 | | Credit | $106,956 | $17,339 | $124,295 | | Equities | $31,893 | $2,359 | $34,252 | | Money Markets | $37,287 | $4,349 | $41,636 | | Total Revenue | $382,863 | $130,108 | $512,971 | Average Variable Fees Per Million Average variable fees per million showed strong growth in Rates, Equities, and Money Markets but declined in Credit Average Variable Fees Per Million ($) | ($ per million) | Q2 2025 | Q2 2024 | YoY % Change | | :--- | :--- | :--- | :--- | | Rates | $2.29 | $2.00 | 14.2% | | Credit | $45.82 | $55.32 | (17.2)% | | Equities | $18.68 | $15.38 | 21.4% | | Money Markets | $0.52 | $0.35 | 48.6% | | Total | $2.30 | $2.43 | (5.4)% | Average Daily Volume (ADV) Total Average Daily Volume grew 32.7% year-over-year, with a significant surge in the Money Markets segment Average Daily Volume by Asset Class | ADV (USD mm) | Q2 2025 | Q2 2024 | YoY % Change | | :--- | :--- | :--- | :--- | | Rates | 1,442,925 | 1,249,433 | 15.5% | | Credit | 37,740 | 29,717 | 27.0% | | Equities | 27,543 | 21,257 | 29.6% | | Money Markets | 1,041,814 | 621,840 | 67.5% | | Total | 2,550,022 | 1,922,247 | 32.7% | Disclosures and Definitions This section provides the basis of presentation, forward-looking statement disclaimers, and non-GAAP definitions - The report contains forward-looking statements subject to risks and uncertainties, and readers are cautioned not to place undue reliance on them[59][60] - The report includes non-GAAP financial measures (e.g., Adjusted EBITDA, Adjusted Net Income, Free Cash Flow) which management believes assist in comparing operating performance on a consistent basis by excluding items not indicative of core performance[61] - Constant currency changes are presented to evaluate underlying performance between periods by removing the impact of foreign currency fluctuations[66]