Tradeweb Markets Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights:

• Business Performance: Surpassed $500M in quarterly revenues for the third consecutive quarter; year-to-date revenues up 21% or 17% organically.
• Market Environment: Characterized by low interest rate volatility, tight credit spreads, muted equity volatility; geopolitical uncertainty and AI reshaping work/life.
• Product Initiatives: Focus on innovative solutions for the global fixed income ecosystem; expanding dealer algorithmic execution capabilities; launched first electronic swaption package trading protocol.
• International Expansion: International revenues scaling higher, with over half of revenue growth from outside the U.S.; successful launch of first electronic bond alternative trading system in Saudi Arabia.
• Technology and Data: Investments in tech, communications, digital assets; data strategy and infrastructure; renewed LSEG market data agreement for 3 years.

Segment Performance:

• Rates: Second highest revenue quarter, driven by organic growth in swaps and global government bonds; mortgages achieved record revenues.
• Credit: Low single-digit revenue growth, with double-digit growth in European credit and municipal bonds offsetting U.S. credit weakness; achieved record block share (10%) in fully electronic U.S. investment grade.
• Equities: 17% year-over-year revenue growth, led by global ETFs and equity derivatives.
• Other Revenues: Over 50% growth, driven by emerging digital asset initiatives.
• Market Data: Driven by growth in proprietary data products; reached agreement in principle to renew LSEG market data agreement for 3 years, increasing in value by 9% annually.
• International: Revenues up 25% year-over-year, with EM and APAC initiatives paying off; over half of revenue growth from outside the U.S.
• Swaps: Record revenues, 30% year-over-year growth, with 40% year-to-date growth; 30% of cleared IRS market is electronic, but risk-based electronification is increasing.
• Global Credit: Low single-digit growth, with double-digit growth in European credit and munis; focused on RFQ share growth in U.S. credit.

Guidance:

• Expenses: 2025 adjusted expense guidance tightened to $1B to $1.025B; fourth quarter expected to have sequential dollar increase in technology and communication expenses.
• Market Data Agreement: Renewed LSEG market data agreement for 3 years, with value increasing by 9% annually.
• Outlook: Confident in opportunities ahead despite current market challenges; focus on building innovative solutions to win market share from voice markets.

Risks:

• Market Volatility: Low volatility impacting activity levels and market share in some segments.
• Geopolitical Uncertainty: Continued geopolitical uncertainty affecting market dynamics.
• Complacency: Risk of complacency in digital asset and electronification initiatives.
• Regulatory Changes: Shifting regulatory frameworks could impact business operations.

Question and Answer: Q: Chris Allen on rate environment catalysts and impact of government shutdown on activity.

A: William Hult discussed data dependency, Fed actions, and potential catalysts for volatility, noting new data sparks volatility and midterms as potential catalysts.

Q: Jeff Schmitt on treasury market share mix shift to voice trades.

A: William Hult addressed it's not structural, but focus on electronifying package trades, with share rebounding and expecting continuation.

Q: Dan Fannon on outlook for rates and impact on trading volumes.

A: William Hult and Sara Furber talked about constructive rate environment, fee per million impact, and historical performance showing growth despite challenging rates.

Q: Alex Blostein on tokenized assets opportunities.

A: Sara Furber and William Hult discussed tokenization as extension of electronification, revenue from Canton Network, and risks of complacency.

Q: Simon Clinch on electronification in U.S. credit.

A: William Hult talked about gradual progress, technology, data, and trading behavior shifts needed for electronification in U.S. credit.

Q: Elias Abboud on ICD treasury trading adoption and M&A outlook.

A: Sara Furber discussed ICD momentum, seamless experience integration, and disciplined M&A evaluation.

Q: Kenneth Worthington on M&A and digital asset focus.

A: Sara Furber talked about evaluating amplifying value proposition, digital trading life cycle, and frontier markets like institutional crypto.

Q: Benjamin Budish on market volumes and uncertainty.

A: William Hult and Sara Furber discussed ability to win in different market environments, with sustained investment through the cycle supporting performance.

Q: Alex Kramm on IRS electronification percentage.

A: Sara Furber explained the 30% number masks underlying trends like risk-based electronification and emerging markets growth.

Q: Kyle Voigt on capital priorities and organic investments.

A: Sara Furber discussed capital management philosophy, share repurchases, and organic investment focus on EM, swaps, credit, AI, data infrastructure, and digital.