• Revenue: $463 million, up 25.2% year over year.
• Adjusted EBITDA Margin: 53.3%, increased by 91 basis points compared to 2023.
• Free Cash Flow: Approximately $809 million for the trailing twelve months.
• Net Interest Income: $14.2 million, decreased due to lower cash balances.
• Dividend: $0.12 per class A and class B shares, up 20% year over year.
• International Revenue: Approximately 40% of fourth-quarter revenues.
• Variable Revenues: Increased by 30%.
• Total Trading Revenues: Increased by 26%.
• Adjusted Expenses: Increased 25% on both a reported and constant currency basis.
• Cash Position: $1.3 billion in cash and cash equivalents.
• Guidance for 2025 Adjusted Expenses: Expected to range from $970 million to $1.03 billion.
• CapEx and Capitalized Software Development: Expected to range between $99 million and $109 million.

• Warning! GuruFocus has detected 7 Warning Signs with TW.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tradeweb Markets Inc (NASDAQ:TW) achieved record revenues in the fourth quarter of 2024, marking the best revenue year and quarter in the company's history.
• The company reported a 25.2% year-over-year revenue growth, driven by strong client activity, share gains, and a risk-on environment.
• Tradeweb expanded its developed market footprint globally and made significant inroads into emerging markets, with EM revenues now run-rating at over $60 million annually.
• The company's rates business produced a record revenue quarter, supported by organic growth and acquisitions such as r8fin and Yieldbroker.
• Tradeweb's strategic partnerships and acquisitions, including Yieldbroker, r8fin, and ICD, have deepened client relationships and are expected to pay dividends in the future.

Negative Points

• Retail credit revenues were down 11% due to outsized muni tax-loss selling in the fourth quarter of 2023.
• The overall market share in global swaps decreased to 20.8%, primarily due to a significant drop in European swap client-related compression volumes.
• Adjusted expenses for the fourth quarter increased by 25%, driven by investments in marketing, digital assets, consulting, and client relationship development.
• The company expects occupancy expenses to increase approximately 40% year over year, primarily due to the move to a new New York City headquarters.
• Tradeweb's guidance for 2025 indicates that while they expect adjusted EBITDA and operating margin expansion, the incremental margin expansion may be more muted compared to 2024.

Q & A Highlights

Q: Can you discuss the current environment for trade swaps and the factors affecting compression activity? A: William Hult, CEO, explained that the macro environment is conducive for risk-on trading, with increased active users and swap revenue growth. He noted that the shift from compression trading to risk-based trading is due to market conditions and client preferences for real risk transfer.

Q: How is Tradeweb approaching digital assets and blockchain technology? A: William Hult, CEO, emphasized that Tradeweb's focus is on adding value through technology, not just creating headlines. The company is exploring trusted shareable data, smart contracts, and tokenization. Partnerships with firms like Securitize and joining the Canton Network are part of their strategy to innovate in this space.

Q: Can you elaborate on Tradeweb's ability to manage expenses and maintain operating leverage? A: Sara Furber, CFO, highlighted that 50% of Tradeweb's expense base is variable or discretionary, allowing flexibility in different revenue environments. The company dynamically manages costs and has a track record of maintaining margins even in weaker revenue periods.

Q: How does Tradeweb view the impact of potential regulatory changes on electronification trends? A: William Hult, CEO, stated that the trend towards electronification is one-way and not affected by regulatory changes. He believes that strong bank performance and efficient electronic intermediation are beneficial for Tradeweb, as they serve as a trusted intermediary between banks and clients.

Q: What are Tradeweb's plans for growth in emerging markets? A: William Hult, CEO, mentioned that Tradeweb is focusing on expanding its presence in emerging markets, particularly in EM swaps and credit. The company sees a significant opportunity in these markets, with EM revenues up 85% year over year, and plans to leverage its strengths in rates and credit to capture more market share.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.