Tradeweb Markets Inc. (TW) 1Q25 Earnings Review
Earnings Inline with Consensus Estimates On a Record Volume & Revenue Quarter; Market Volumes Continue to Set Records in April
EPS Inline With Consensus Forecast as Record Revenue Comes in <1% Above Expectations
TW reported 1Q25 earnings prior to market open today. Total revenue came in at a record $510M, up 10% Q/Q and up 25% Y/Y. The sequential increase in revenue was driven by an increase in transaction fees and commissions, which rose 10% Q/Q and were up 26 Y/Y to $421M. Meanwhile, subscription fees increased 1% Q/Q (+12% Y/Y) to $56M, LSEG market data fees rose 41% Q/Q (+41% Y/Y) to $29M and other revenue was unchanged Q/Q (+17% Y/Y) to $4M. On the expense side, total adjusted operating came in at $249M, up 5% sequentially (+22% Y/Y) and drove operating margins to 51.2% (up 210bps Q/Q and up 120bps Y/Y). Non-operating income came in at $13M (-7% Q/Q, -31% Y/Y) and adjusted diluted EPS came in at $0.86, up 14% Q/Q (+22% Y/Y).
Relative to consensus estimates, revenue came in <1% above the consensus forecast of $508M. Meanwhile, pre-tax income was 2% above the street and adjusted EPS came in inline with consensus.
In terms of key operating metrics, volume detail for the quarter was known coming into today’s print, however, to recap the quarter, total ADV was a record $2.5T for 1Q25 (+11% Q/Q, +34% Y/Y). “New” revenue metrics from today’s print include fee per million detail, which increased 2% Q/Q (-10% Y/Y) to $2.31 (“new” is in quotes because TW released preliminary FPM detail for the quarter with its March volume release).
TW Earnings Summary and Key Operating Metrics
Source: company data and Tikr.com
Highlights from TW Earnings Call, Presentation and Press Release
In terms of the outlook going forward, TW 0.00%↑ management touched on several details during this morning’s earnings call that are worth highlighting:
Expenses – No change to original expense guide of $970M - $1.03B. Continue to expect margin expansion compared to 2024, though at a more modest pace as TW expects to capitalize on strong revenue environment by accelerating investments to support organic growth
CapEx – Continue to expect capex of $99 - $109M with capex ramping from 1Q levels
LSEG Revenue – No change to original guidance of $90M for the year (note: LSEG revenue came in at $29M for 1Q)
Credit Fixed / Variable Fees – Evolving pricing model as business has scaled and now introducing subscription fees and increasing minimum floors with certain dealers to incentivize long-term growth and innovation while also optimizing variable buy-side fees. Anticipate 2Q fixed credit revenue to increase $6-7M from 1Q. Revenue shift should be totally revenue neutral which would imply a $6-7M decrease in variable credit fees which translates into roughly a $9.00 drop in Cash Credit Fee Per Million in 2Q relative to 1Q
April Volume / Market Share Environment – Overall revenue growth is trending 30% higher than April 2024. Investment grade fully electronic credit market share is trending below March levels while high yield fully electronic credit market share is trending ahead of March levels. Early April saw 3 trading days in a row with volume over $3T
Other notable highlights from the earnings call/press release:
Early April Activity / Market Function – Market function held up during unprecedented moves in early April. Clients relied heavily on electronic trading
Broad Thoughts / Outlook
I thought this was a solid quarter out of TW. Revenue growth was strong both sequentially and Y/Y in the quarter and expenses remained in check despite the strong revenue environment. Operating margins for the quarter were an impressive 51.2%, the highest quarterly level since at least 2020. And while the change in pricing change on the credit side will limit some of the upside TW receives should markets become volatile I view it as a positive endorsement of TW’s markets that dealers are willing to accept fixed fees (which will insulate TW if markets / trading become softer) and higher minimum fees and the new pricing methodology will still allow TW to capture some upside in more volatile trading conditions.