Tradeweb Markets Inc Q1 2019 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ken Worthington - JPMorgan - Analyst : Good morning and thank you for taking my question. In credit the market share of electronic trading fell in the quarter while the share of electronically processed jumped a lot. Can you talk about what contributed to this dynamic this quarter? And any color you can share on the transition you're seeing from electronically processed to electronic traded?

Question: Rich Repetto - Sandler O'Neill - Analyst : Congrats on your first call here. So I guess my question, you referred to or mentioned margins expansion in the prepared remarks. And I guess when you look at your adjusted EBITDA margins, I know they were 43% and up significantly year-over-year. But when you look at them compared to your peers out there they are about 14 points below. And it looks like it's all in the comp ratio, which was about 15 points below. And I know your model has been accommodative to voice trading. You earn revenue off it. It's a pipeline to electronic revenue. But to expand the margin it seems like you're going to need to expand -- improve on the comp ratio, because the non-comp expense structure looks in line with your peers. So could you just talk about a little bit how you're going to do that and what the timing is around that?

Question: Alex Blostein - Goldman Sachs - Analyst : Congrats as well. A question either for the Lee or Billy also around credit. Obviously it sounds like there's a lot going on on the growth initiative side. So I was hoping you could just walk us through the key growth initiatives in credit you have over the next 12 months. And specifically the two items I was hoping you could hit on is where you stand on a more holistic integration with some of the OMS providers such as Aladdin and maybe

Question: Alex Blostein - Goldman Sachs - Analyst :

Question: Ari Ghosh - Credit Suisse - Analyst : So, just a quick one on the expenses. And thanks again for providing the guide. So if I look at the $460 million to $475 million expense guide that you have, can you maybe talk about some of the internal assumptions driving this range? And then could there be any potential upsides over here from rationalizing your Amsterdam footprint depending on the outcome for Brexit? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2019 / 12:30PM, TW.OQ - Q1 2019 Tradeweb Markets Inc Earnings Call

Question: Dan Fannon - Jefferies LLC - Analyst : My question is on the fixed revenue outlook. As you kind of expand your customer base and continue to grow, how should we think about that as the contribution or the growth rate around the fixed component?

Question: Michael Carrier - BofA Merrill Lynch - Analyst : Just in terms of the current backdrop, so your volumes remain strong. You hit on a lot of the structural growth. Just wanted to get a little sense on pricing, how we should be thinking about some of the mix shifts that you guys face from time to time. And then also just on the competitive front, it's one of the things that's a little bit tougher for us to see based on the disclosure. So, any view on the outlook on the pricing side? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2019 / 12:30PM, TW.OQ - Q1 2019 Tradeweb Markets Inc Earnings Call

Question: Chris Allen - Compass Point - Analyst : Good morning, guys, and thanks for taking the questions. I guess you talked a lot about digitization opportunities moving forward. Maybe you could give us what do you see as the biggest opportunities longer-term. I know there's been talk about US treasuries as an opportunity, but that seems to be a bigger opportunity off the run markets from an electronification standpoint, which presents its own challenges. So any commentary there would be helpful. Thanks, guys.

Question: Alex Kramm - UBS - Analyst : Just switching gears a little bit back to I guess rates, I think what you pointed out at the beginning of the call, again strong volume growth year-over-year, quarter over quarter, also in April. I was wondering if you could just talk a little bit more broadly about any sort of macro factors that are driving the performance there. And I guess what I'm asking specifically is I know you are innovative, I know you are introducing new products, but when you look at maybe some of the peers on the future side or the wholesale side that's publicly reported, you are outperforming a lot. And I know there's a component of you executing, but any shifts that you're detecting when you talk to clients about what's going on between wholesale, futures and your own more institutional markets that you would point to to make it easier for us to gauge what's going on in the markets broadly?

Question: Jeremy Campbell - Barclays Capital - Analyst : With your market share having ticked up a bit especially in fully electronic credit, which is presumably the highest fee rate, I know you guys have said on balance over time that credit derivatives are dilutive in the fee rate and the rates -- credit and rates derivatives are accreted. But can you guys give us a relative sense of the two fee rates to aide forecasting or maybe help us think about the outlook for fee rates over this coming quarter or the rest of the year? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2019 / 12:30PM, TW.OQ - Q1 2019 Tradeweb Markets Inc Earnings Call

Question: Ben Herbert - Citi - Analyst : Just wanted to ask on the OpEx, adjusted OpEx guide and maybe how to think about stock-based comp through the remainder of 2019 and then into 2020. Thank you.

Question: Brian Bedell - Deutsche Bank - Analyst : Maybe if you could talk a little bit about your view of the pace of electronification in both rates and credit. Whether you see this actually -- the actual pace of that improving significantly near-term and in conjunction, Lee, with your comments about the blurring of distribution channels and all-to-all and AIX. And what are the resistance points that you're still coming up against for traders not to go electronic?

Question: Brian Bedell - Deutsche Bank - Analyst : So you are seeing those resistance points sort of ebb to some degree? Or are you still getting some resistance that creates a bit of a challenge (multiple speakers)?

Question: Michael Cyprys - Morgan Stanley - Analyst : Just on the net spotting protocol, it seems like you guys have gotten tremendous traction and uptake from clients on that. Just curious if you could talk a little bit about how you are thinking about spending that as others in the industry try and replicate and bring something similar to market. I think you may have a patent pending. I guess what sort of actions can you take to defend if and when as competitors try and catch up?

Question: Ken Worthington - JPMorgan - Analyst : In recent days we've seen a spike in equity volatility and it's been accompanied by some higher US rate fall as well. In periods of more elevated volatility, does Tradeweb cede disproportionately more or less market share in rates versus maybe more normal market conditions? I guess in other words does Tradeweb's market share go higher and lower when rate volatility rises? And then maybe the same question for your equity business and credit as well.

Question: Alex Kramm - UBS - Analyst : Just maybe two follow-ups, but I'll start with one first. On China, can you just give us a little bit more updates what's happening on that side? How the markets are developing? But then maybe a little bit more specifically looking at maybe the markets more broadly over there. S&P recently got the permission to rate credit over there and I assume some of the other Western rating agencies will follow. Just wondering if you're following that closely, if you think that's going to be a boost to the markets over there and what it could mean for trading global -- I guess globally in the markets for you. I guess the question is are you focusing on that and do you think it's going to be changing the market dramatically from your perspective?

Question: Alex Kramm - UBS - Analyst : Okay, great. And then maybe since we're in follow-up mode here, just one other one quickly if I may. In terms of other asset classes, I think I've asked you this in the past, but one that always sticks out to me that you're not in is FX. And clearly in your prior organizational structure under Thomson Refinitiv there were some other FX assets at those companies that that Company owned. Just wondering, now that you're a little bit more separated, is that an asset class that you have higher interest in? Do you think there are -- is there value to be added in obviously the biggest asset class on daily notional traded? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2019 / 12:30PM, TW.OQ - Q1 2019 Tradeweb Markets Inc Earnings Call

Question: Ari Ghosh - Credit Suisse - Analyst : So, maybe just a quick one for either Lee or Billy. Just back to your US cash credit business, so you saw strong gains here, market share gains in US high grade. Maybe just a little more color about what's going on here, what's driving it? Is it the benefits from the net spotting technology that you talked about, cross-sell opportunities between your client segments? Are there additional factors here as well? What's driving the gains versus -- especially versus your competitors over here?