Tradeweb(TW) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter average daily volume reached nearly $1.4 trillion, up 16% year-over-year, and up 11% when excluding short tenor swaps [28] - Gross revenues increased by 5.7% on a reported basis and 7.5% on a constant currency basis [30] - Adjusted EBITDA margin for the quarter was 52.3%, an increase of 37 basis points on a reported basis [32] Business Line Data and Key Metrics Changes - The U.S. corporate credit business grew 7% year-over-year, with revenue growth across all three client channels [18] - The municipal business reported nearly $50 million in annual revenues, with over 25% revenue growth in the first quarter [14] - The global swaps revenues rose 5% year-over-year, with market share increasing to 15.3% [23][24] Market Data and Key Metrics Changes - U.S. Treasuries revenues increased by 15% year-over-year despite a slight decline in industry volumes [81] - Institutional average daily trades for U.S. Treasuries rose to record highs, up 50% year-over-year [82] - The average daily trades for global credit AiEX increased by 60% year-over-year [17] Company Strategy and Development Direction - The company aims to build its international presence beyond Europe, focusing on APAC and emerging markets [5] - The acquisition of Yieldbroker is intended to expand the client base and grow the Asia Pacific footprint [6][7] - The company is focused on digitizing voice workflows and enhancing its product offerings in emerging markets [10][12] Management's Comments on Operating Environment and Future Outlook - The management noted that the recent banking crisis had a limited direct impact on the company, but it did create a more risk-off environment [55][57] - The company is optimistic about the new equilibrium with higher rates and a steeper yield curve, which is favorable for fixed income trading [58][59] - Management emphasized the importance of staying close to customers and continuing to innovate [59] Other Important Information - The company ended the first quarter with $1.2 billion in cash and cash equivalents, and free cash flow reached approximately $600 million for the trailing 12 months [39] - The company declared a quarterly dividend of $0.09 per Class A and Class B share [47] Q&A Session Summary Question: Impact of bank crisis on business - Management indicated that there was no significant direct impact from the bank crisis, but noted a shift to a more risk-off environment [55][57] Question: Potential for bank hedging with interest rate swaps - Management acknowledged the increased focus on risk management and the potential for banks to increase usage of interest rate swaps [63][66] Question: Update on FI migration and client response - The data center migration was completed, and clients are now testing at the new location, which is expected to improve liquidity [71][73] Question: Renegotiation of Refinitiv contract - Management stated that the contract expires in late 2024, and discussions are constructive, with a focus on identifying more use cases for partnership [85][87] Question: Cross-sell opportunities from Yieldbroker acquisition - The acquisition is expected to deepen the product footprint and expand the client base in the APAC region, with significant revenue synergies anticipated [91][92] Question: Fee per million movements - Management explained that fee per million is influenced by business mix and duration, with long-term trends expected to stabilize and potentially improve [97][100]