Tradeweb Gains With Profit Beat, CEO Citing January Momentum
Tradeweb Gains With Profit Beat, CEO Citing January Momentum
(Bloomberg) -- Tradeweb Markets Inc. rallied as much as 3.1% in Wednesday trading, to the highest since August, after reporting better-than-expected fourth-quarter results and as Chief Executive Officer Lee Olesky flagged strong momentum in January.
“January was a good start to the year,” with growth across the board, Olesky said via telephone. “A number of new innovations are starting to click in,” he added, including an evolution in portfolio trading.
Olesky also said that the new coronavirus outbreak isn’t affecting Tradeweb’s overall strategy with respect to China or customers’ demand for access to China’s bond market. On the company’s earlier conference call, Olesky noted that Chinese New Year had hit in January this year versus February last year, and said that markets were closed for a day as a result of the virus.
He declined to comment about the impact a potential win for Bernie Sanders or another progressive Democratic candidate might have on financial markets regulation, though he said that the company pays close attention to rules as its industry is highly regulated.
Tradeweb earlier reported fourth-quarter adjusted earnings per share of 26 cents, topping analysts’ estimates by 1 cent. Quarterly revenue of $197.3 million rose 10.5% compared to the prior year and beat analysts’ estimates of $196 million. Tradeweb’s adjusted Ebitda margin rose to 46.9% versus 36.6% in the prior year period, while fourth-quarter average daily volume, or ADV, rose 16.3% to $684.6 billion.
“Adoption of electronic trading is accelerating as market participants gain a deeper appreciation for the functionality, efficiencies, data and analytics it delivers,” Olesky said in the firm’s earnings statement.
“New highs for volumes and market share in U.S. credit reflect heightened client demand for advanced trading protocols such as portfolio trading, all-to-all trading and session-based trading,” Olesky said. “Rates cash and derivatives volumes surged on higher trading activity in mortgages and interest rate derivatives,” he said, while “AiEX automated trading accounted for more than a quarter of total institutional tickets across all products during the quarter.”
The company’s earnings beat estimates due to lower-than-expected expenses, while its 2020 expense outlook was in line with expectations, Piper Sandler’s Richard Repetto wrote in a note.
Slightly higher Market Data revenue per share more than offset slightly lower Trading revenue, while adjusted operating expense fell about in line with expectations, Citigroup’s Ben Herbert wrote.
Positives in the quarter included an increase in adjusted operating margin; above-forecast January credit and equities ADV, “indicating that benefits of services, partnerships and initiatives to drive greater adoption and secular ETF tailwinds continue,” and a better-than-expected 2020 tax outlook, Herbert said.
Tradeweb shares have rallied 74% since the company’s IPO in April. So far this year, the stock has climbed about 1.5%.
Fourth-quarter revenues from rates rose 10.2% to $107.5 million; ADV in rates of $451.3 billion increased 19.1% on more trading activity in mortgages and interest rate swaps and swaptions. Credit revenue of $43.5 million rose 17.0%; ADV in credit of $13.2 billion grew 9.8% due to increases for U.S. high-grade and high-yield credit, plus increased trading activity in European credit.
Tradeweb also said it sees 2020 adjusted expenses of $495 million to $510 million; an adjusted tax rate of 22.0%; capital expenditures and capitalization of software of $45 million to $50 million, and acquisition and Refinitiv deal-related depreciation and amortization expenses of $110 million.
Read more: Nov. 20, Goldman Shifts Views on Exchanges to Upgrade Tradeweb, Cut Cboe
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To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm
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