Tradeweb Markets Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Record Revenues: Set a new high watermark for quarterly revenues, surpassing the first quarter 2025 record. Revenues exceeded $1 billion in the first half of 2025, with expectations of double-digit revenue growth in 2025.
• Client Activity: Strong client activity and risk-on environment drove 26.7% year-over-year revenue growth. Clients became increasingly sophisticated in seeking liquidity, and dealer/nonbank liquidity providers invested in 2-way markets.
• Innovation: Momentum continued with innovations like AiEX and Portfolio Trading. Clients leaned into newer innovations during volatility. Adjusted EBITDA margins expanded by 70 basis points relative to Q2 2024.
• Asset Class Performance: Rates, credit, money markets, equities, and market data all saw strong performance. International business growth was robust, with 41% revenue growth.

Segment Performance

• Rates: Produced a record revenue quarter, driven by organic growth in swaps, global government bonds, and mortgages.
• Credit: Double-digit revenue growth, with strong performance in credit derivatives and municipal bonds; global corporate credit had mid-single-digit growth. Automation resonated, with AiEX average daily trades up over 15% year-over-year.
• Money Markets: Revenue growth led by the addition of ICD and record quarterly revenues across global repos. However, market volatility negatively impacted ICD balances as large clients drew down funds.
• Equities: Posted record results, up 50% year-over-year, led by growth in global ETF and equity derivatives business. ETF business generated record revenues, and institutional equity derivatives revenue was up 30% year-over-year.
• Market Data: Driven by growth in proprietary data products.
• International Business: Continued to set new records with 41% revenue growth, with strategic initiatives in EM and APAC paying off. European swaps up 40%+, emerging market swaps up 80%, APAC swaps doubled, etc.

Guidance

• Adjusted Expenses: Increased adjusted expense guidance to $1 billion to $1.05 billion, trending towards the midpoint. Investments in growth areas like U.S. and European credit, specified pools, mortgages, global repos, and digital assets.
• LSEG Agreement: Expect 2025 revenues generated under the master data agreement with LSEG to be approximately $90 million, up approximately 10% from 2024.
• Future Investments: Continued focus on investing for growth while maintaining profitability, with plans to accelerate investments in the second half of 2025.

Risks

• ICD Balances: Market volatility led to large clients drawing down money market fund balances in ICD, negatively impacting the business.
• Market Share Shifts: In U.S. treasuries, market share declined due to an industry-wide mix shift towards voice-centric basis and swap spread trades.
• Regulatory/Market Uncertainties: Volatility, regulatory changes, and macro uncertainties could impact client behavior and business operations.

Question and Answer

• Q: Alex Kramm on U.S. treasuries market share decline and recapturing share A: Billy Hult discussed mix changes (phone vs. electronics, wholesale vs. institutional), focus on micro protocols like request for market, and the R8fin acquisition to address voice-centric trades. Emphasized continuing to solve for client workflow issues to recapture share.
• Q: Craig Siegenthaler on client reaction to new buy-side fees in high yield and investment-grade A: Billy Hult noted strong client response, with institutional high-yield share increasing. Mentioned buy-side fees in IG since 2016 and continued investment in credit business, including attacking more of the block market and enhancing RFQ.
• Q: Benjamin Budish on ICD progress and cross-selling A: Sara Furber discussed ICD client retention (34 new clients in 2025, balances up modestly), balance volatility due to market events, and cross-selling efforts. Focus on expanding ICD's product reach (e.g., T-bills) and client reach, leveraging sales force and regulatory infrastructure.
• Q: Alex Blostein on fee per million dynamics in swaps A: Sara Furber stated confidence in maintaining or modestly growing fee per million in swaps, driven by product mix (higher-priced products/protocols like emerging markets and RFM). Highlighted opportunities in electronifying bilateral swaps and growing revenue despite potential offsets to fee per million.
• Q: Chris Allen on international growth and regional focus A: Billy Hult discussed strong growth in Europe (35% revenue increase), Asia (over 40% revenue increase), and emerging markets. Focus on regions like Asia, Australia, Lat Am, Middle East, and expanding ICD internationally. Mentioned initiatives like AiSNAP in Europe and expanding swaps/ETFs in Asia.
• Q: Ken Worthington on digital assets and M&A A: Billy Hult discussed digital asset strategy, including focus on distributed interoperable fixed income ecosystem using DLT, partnerships with Canton Network, Securitize, etc. Mentioned appetite for M&A to expand total addressable market, with focus on fit with strategic vision and financial discipline.
• Q: Patrick Moley on M&A appetite and crypto A: Billy Hult emphasized strategic M&A to expand TAM, focus on culture fit, and openness to new asset classes/geographies. Crypto seen as an area of interest, with focus on custody evolution and technology partnership.
• Q: Dan Fannon on regulatory reform and SLR A: Sara Furber noted potential capital relief from SLR changes, which could increase resilience and liquidity in the treasury market. Strong bank partners with more capital available, facilitating more trading and positive impact on rates business.