Tradeweb Markets Inc Q3 2024 Earnings Call Transcript

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

Question: Chris Allen - Citi - Analyst : Morning, everyone. Thanks for taking the question. Just wanted to ask on credit. We've had increasing questions as to how Tradeweb's platform has been evolving from here relative to market access, it was called out specific new developments on their platform just in terms of their enhanced algo suite, enhanced deal of protocols, improved trading front end. Some of these developments look like catch ups to Tradeweb, others look to position them for increased block penetration. So it'd be great to hear how Tradeweb stacking up here and how they -- are how you are positioned for increased block penetration moving forward?

Question: Chris Allen - Citi - Analyst : Thanks.

Question: Bill Katz - TD Cowen - Analyst : Okay. Thank you very much for taking the questions and good morning, everybody. Appreciate all the disclosure. Maybe just I know one question, but just one clarification. Just Billy, in terms of your commentary around fee per million, given the duration and the curve, so I want to make sure that's all both incremental. So it will be 5% to 6% plus 6% to 7%, so I want to make sure I heard that correctly. And then the broader question I have just sticking on competition for a moment. I guess one of your competitors market access has linked up with ICE to potentially expand their trading in credit as well. I was just wondering if you could address that. And maybe the broader question is, as private markets continue to get a bigger role in capital markets, how does that affect the long-term algorithm for growth? Thank you

Question: Bill Katz - TD Cowen - Analyst : Thank you.

Question: Richard Fellinger - Autonomous Research - Analyst : Hey, good morning. I wanted to ask about expenses. Adjusted EBITDA margin expansion remains pretty solid year-to-date versus the 50 basis points last year. May maybe just on the longer term outlook, could you remind us how you think about expense growth and margin expansion as we start to think about the next few years?

Question: Richard Fellinger - Autonomous Research - Analyst : Great. Thank you.

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Hey, good morning, everybody, and thank you for the question. I wanted to talk for a minute about fee per million trends in the interest rate swap business. There are a number of crosscurrents in that business obviously, volumes clearly very strong, duration shifting around a little bit and compression trading can kind of swing things up and down as well. So, but all in, you guys put up over $3 in fee per million and swaps over one year. How do you think about I guess the trajectory there from here and maybe a broader comment on revenue growth algorithm in this business over the next one to two years?

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : [Well] great.

Question: Alexander Blostein - Goldman Sachs & Co. - Analyst : Yeah, that's super helpful. Thank you both.

Question: Michael Cyprys - Morgan Stanley - Analyst : Hey, good morning and thanks for taking the question. Just wanted to ask about ICD with the deal now closed. I was hoping you could elaborate a bit on how you expect this to contribute to revenue and earnings as you look out over the next couple years. What sort of steps might you be REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:30PM, TW.OQ - Q3 2024 Tradeweb Markets Inc Earnings Call able to take to help accelerate the growth of the ICD business over the next couple of years? What might be some of the low hanging fruit versus what aspects might be a bit harder or take a bit longer to achieve? And then just more near-term, what might be some of the opportunities to offset any potential slower demand from money funds with rate path expected to move lower?

Question: Michael Cyprys - Morgan Stanley - Analyst : Great. Thanks so much.

Question: Dan Fannon - Jefferies LLC - Analyst : Thanks. Good morning. Billy a question on portfolio trading. Competition within this protocol has been increasing. You have some industry participants doing certain trades for free, while pricing hasn't changed at a headline level. How are you thinking about pricing pressure over time?x

Question: Dan Fannon - Jefferies LLC - Analyst : Thank you.

Question: Kyle Voigt - KBW - Analyst : Hey, good morning. So with ICD now closed, you still have excess cash in the balance sheet, no debt capital flexibility. As we're thinking about the future for capital deployment M&A, can you talk about your willingness to execute on M&A while still in the process of integrating ICD? And also if you could share whether there are any notable asset classes or client segments where you feel like there you are still underpenetrated, but where there could also be synergy with the broader trade web platform. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:30PM, TW.OQ - Q3 2024 Tradeweb Markets Inc Earnings Call

Question: Kyle Voigt - KBW - Analyst : Thank you.

Question: Patrick Moley - Piper Sandler - Analyst : Yeah, good morning. Thank you for your question. I just had one on the rates business, Billy, you talked in your prepared remarks and a little bit here in Q&A on the strength you're seeing in swaps. So we're just hoping you could expand on that and talk about maybe what you're seeing across the rest of the rates franchise. And then additionally, just broadly given the environment and the rate outlook, would you say that you're seeing velocity pick up across your markets? Thanks.

Question: Benjamin Budish - Barclays - Analyst : Hi, good morning. Tthanks for taking the question.I wanted to ask about the mortgage business. So rates have generally been falling. We've seen the business come to life a little bit. Can you kind of talk about what you're seeing there under the surface and then how important are sort of continued decline in rates to growth in that business? As you see it, it looks like in October at least the sort of average 30 year rate is picking back up. So do you think that is that important or what other -- what are the other kind of important drivers to think about for mortgages in particular?

Question: Benjamin Budish - Barclays - Analyst : Got it. Thanks very much.

Question: Ken Worthington - JP Morgan - Analyst : Hi, good morning. Thanks for taking the question. So it's been a great year for activity levels. Maybe another great year across your major asset classes. How are you seeing the potential for rates, high grade, high yield activity for next year. Is greater industry activity levels, do you see it as being possible? Is it likely? Which of your flagship products do you think you have the greatest conviction that you can see better industry volumes in for next year? And if activity levels become more challenged, where do you see the potential for increased market share from here to be able to most likely offset any potential for weaker activity levels?

Question: Ken Worthington - JP Morgan - Analyst : Wonderful. Thank you so much.

Question: Alex Kramm - UBS - Analyst : Yeah, hey, good morning, everyone. I know it's late in the call. Actually one quick housekeeping question before, I don't know if you've clarified, but the 30% increase in revenue in October that you talked about, is that an organic number? Because I think ICD adds, I think high-single-digits. So maybe clarify that, but then just coming back to the credit commentary, I know a lot of detail on what you're doing earlier in the call but I just want to bring it back to the numbers for a second, because if I look over the last five, six quarters or so, yes, your market share and credit is up a little bit, but it seems to have all come from PT and that's obviously a little bit more under attack. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 1:30PM, TW.OQ - Q3 2024 Tradeweb Markets Inc Earnings Call And if you look at your RFQ, your all trade those market shares have been really flattish. So given that you're signing up new institutional investors or clients, I think up almost 10%. Like are those people not really contributing or why is the take up in those traditional segments not really happening outside of PT? Thanks.

Question: Alex Kramm - UBS - Analyst : Fair enough. Thanks very much for the additional color.