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
Robert Warshaw

expect G&A to trend between $7 million to $8 million per quarter during the back half of 2020. Long term, our level of spend is under review. Technology and communication costs increased primarily due to higher clearing and data feeds as a result of higher trading volumes as our anonymous credit volumes and streaming US treasury volumes continued to grow. In addition, this quarter also saw the impact of our previously communicated investments in data strategy and cybersecurity. Recall, our guidance embeds a $4 million to $5 million increase versus 2019.

Slide 13 details capital management and our guidance. We ended the second quarter in a strong position, holding $560 million in cash and cash equivalents, and free cash flow reached $353 million for the trailing 12 months. We have access to a $500 million revolver that remains undrawn as of quarter end. Capex and capitalized software for the quarter was $10.8 million, an increase of 15% year-over-year and continues to be in line with our expectations. With this quarter's earnings, the Board declared a quarterly dividend of $0.08 per Class A and Class B share.

Turning to guidance for 2020. Given the delay of our New York real estate decision to 2021 and reduced T&E expenses as a result of the work-from-home environment, we now expect adjusted expenses to trend between $495 million and $505 million in 2020. We continue to believe we can drive operating margin expansion compared to 2019 at either end of this range. For forecasting purposes, we are using an assumed non-GAAP tax rate of 22% for the year. We also expect capital expenditures and capitalized software to be in the range of $45 million to $50 million. Finally, we have updated our quarterly share count sensitivity for 2020 to help you calibrate your models for fluctuations in our share price.

Now I'll turn it back to Lee for concluding remarks.

Executive
Lee Olesky

Thanks, Bob. The secular trends powering electronification and automation remain intact. We have an exciting plan that we are executing against across our asset classes, and our diversity affords us a variety of opportunities to improve client workflows. Driving strong revenue growth and balancing associated investments with margin expansion continues to be our priority. With a couple of important months -- month end days left in July, cash and derivative volumes across all our asset classes, with the exception of rates derivatives, are up double digits relative to July 2019.

Rates derivatives are down double digits given the lack of volatility and flatter yield curve, similar to conditions we saw last month. These same conditions are benefiting our mortgage business, and Fed issuance continues to help our US treasury business. Overall, electronic IG and high-yield credit market shares are running higher than June 2020 levels. I'd like to conclude my remarks by thanking our clients for their business and partnerships in the quarter, and I want to especially thank my colleagues for their efforts that contributed to our strongest second quarter in our history.