Tradeweb Markets Inc (NASDAQ:TW) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 09:00 am ET

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Tradeweb Markets Inc (NASDAQ:TW) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Lee Olesky

and margin expansion over the next few years as our investments scale globally.

Today, we are investing in developing and scaling new protocols across rates and credit, expanding our geographic reach, especially in the Asia Pacific region, with early signs of success in Australia, and commercializing our data, to just name a few. Our sales team remains highly engaged, and our technology team has a busy pipeline as we look out over the rest of the year.

Turning to Slide 4. We reported the strongest second quarter in our history and set multiple new revenue, new volume records across our products despite a challenging macro environment. Specifically, gross revenues of $212 million during the second quarter of '20 were up 11.4% year-on-year on a reported basis and by 11.8% on a constant currency basis. Our financial performance was once again characterized by strong growth. Our continued double-digit revenue growth and the resulting scale translated into improved profitability year-over-year as our second quarter adjusted EBITDA margin expanded over 200 basis points to 47.8%.

Turning to Slide 5, you can see the diversity of our revenue growth. While rates and money markets saw growth but at slower rates than previous quarters, the other growth engines of our business were on display as credit and equities both grew by double digits, 24% and 38.6%, respectively. Within rates, cash rate revenues, mortgages and US treasuries benefited from Fed actions, while our core swaps business continued to do well, too.

Moving on to Slide 6. Let me provide a brief update on our four main focus areas: global interest rate swaps; US treasuries; US credit; and global ETFs. Starting with interest rate swaps, in a tougher macro environment characterized by lower interest rate volatility, where core IRS volumes dropped by 14% according to Clarus, our core swaps volume, higher fee per million longer duration swaps, grew by 5%. Our total volumes were down 10% year-on-year during the second quarter as a 30% decline in lower fee per million shorter-duration swaps more than offset volume growth in the higher fee per million longer-duration swaps.

We continue to focus on what we can control, deepening our client wallet share and scaling new products like EM swaps. The focus drove global IRS share for the second quarter to nearly 10%, growing substantially year-over-year. We believe we gained meaningful share versus our closest competitor, Bloomberg, in both the US and Europe post March as our deep liquidity pools and recent investments continued to pay off. Longer term, we remain excited by the opportunity here as the rate cycle improves and the market continues to electronify. Billy will give you an update on our strategies momentarily.

Moving on to treasuries. Our volumes were up 14% year-on-year. Our share recovered nicely from the lows seen in March when voice execution was more prevalent as the exceptional volatility drift the US treasury markets. Amidst the backdrop of heavy issuance and Fed purchases, our organic growth initiatives have helped us to continue to