Tradeweb(TW) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported GAAP earnings per diluted share of $0.40, with adjusted net income per diluted share of $0.48, reflecting strong revenue growth [6][50] - Gross revenues reached a record $311 million, up 13.9% year-on-year on a reported basis and 15.9% on a constant currency basis [13][48] - Adjusted EBITDA margin increased to 51.6%, although it declined by 40 basis points compared to the first quarter of 2021 [13][50] Business Line Data and Key Metrics Changes - Record revenues were achieved across U.S. treasuries, European government bonds, global swaps, U.S. and European credit munis, global ETFs, and repo [11][12] - Rates and credit accounted for 46% and 31% of revenue growth, respectively, with rates posting a record quarter driven by global government bonds and swaps [14][15] - The retail business showed its strongest revenue growth since Q3 2019, indicating a recovery in this segment [12] Market Data and Key Metrics Changes - Average daily volume exceeded $1.1 trillion, up 11% year-on-year, with 12 product categories achieving quarterly records [47] - U.S. treasuries volumes increased by 30% year-on-year, with market share rising to 19.6% [17] - The swaps market saw a 25% increase in volume, with market share increasing to 12.7% [16][38] Company Strategy and Development Direction - The company is focused on expanding its multi-asset class trading capabilities and enhancing client engagement through innovative technology [27][42] - Continued investment in driving the adoption of early-stage institutional streaming protocols like Tradeweb Plus is a priority [18] - The transition to new leadership is expected to maintain the company's strategic direction while fostering innovation and client collaboration [25][86] Management's Comments on Operating Environment and Future Outlook - The management highlighted the impact of macroeconomic factors such as Fed tapering, global rate hikes, and inflation on trading volumes and market conditions [9][72] - There is optimism regarding continued growth in the rates business, supported by favorable market conditions and increased volatility [72][74] - The company remains committed to balancing revenue growth with margin expansion despite cost pressures [80][83] Other Important Information - The company ended the quarter with $828 million in cash and cash equivalents, and free cash flow reached nearly $511 million for the trailing 12 months [61] - A quarterly dividend of $0.08 per Class A and Class B share was declared [62] - The company plans to offset equity dilution through share repurchase programs [63] Q&A Session Summary Question: Volatility and Rates Business Comparison - Management discussed the challenges of comparing current market conditions to previous years, noting strong growth in the rates business despite uncertainties [71][72] Question: Credit Platform Performance - The credit platform has seen significant growth, with increased participation from institutional clients and innovations driving performance [76][78] Question: Operating Leverage and Expense Growth - Management emphasized the balance between investing for growth and margin expansion, with expectations for improved operating margins in 2022 [80][83] Question: CEO Transition and Competitive Environment - The new CEO expressed confidence in the company's strategic direction and the competitive landscape, highlighting ongoing innovations and client engagement [86][88] Question: Contract Renegotiation with Refinitiv - Management noted strong demand for data services and a favorable long-term partnership with Refinitiv, with proprietary data products also showing growth [91] Question: Retail Opportunity Contribution - The retail sector accounted for about 6% of revenues, showing signs of recovery, particularly in the middle market segment [93][94] Question: Direct Connectivity with Dealers - Management acknowledged the trend of buy-side firms seeking direct connectivity with dealers but expressed confidence in their competitive position and network [99][100]