August 8, 2019 / 1:30 PM / 16 days ago

TradeWeb earnings beat as volume surges; one-time expenses hit profit

NEW YORK, Aug 8 (Reuters) - TradeWeb Markets on Thursday reported second-quarter earnings which beat market expectations and in-line revenue after adjustments for one-time expenses related to the electronic trading platform’s 2019 IPO.

TradeWeb saw revenue rise by 11.4% from the same period a year prior to a quarterly record of $190.5 million as trading volumes also hit a quarterly high. Trading volume across asset classes was 39.6% higher, with notable increases in U.S. investment-grade credit and interest-rate derivatives.

The New York-based company reported $0.25 earnings per share with one-time costs stripped out, versus $0.23 as expected. Non-adjusted earnings were $0.09 per share.

Top-line growth has surged as fixed-income trading has begun to move online, a transition equities traders made in the 1990s. Capitalizing in part on this shift, TradeWeb went public in April of this year and has since seen its share price rise by 33.86%.

In premarket trading, TradeWeb’s shares were up 2.57% at $45.86 a share.

“The market’s appetite for electronic trading and the data to drive it continues to grow. Despite all of the progress over the past few years, it seems we’re just getting started. The P/E ratios of MarketAxess and Tradeweb both tell quite a story,” said Kevin McPartland, managing director, market structure and technology, at Greenwich Associates.

MarketAxess Holdings is a rival electronic bond-trading platform. Earlier this month it reported a surge in revenue, though, like TradeWeb, it also saw expenses increase as its business grew.

TradeWeb’s price-to-earnings ratio is 65.2; MarketAxess’ is 71.53, suggesting investors are betting on significant future growth. The ratio is much lower for peers in equities trading: Nasdaq trades at 19.38 times earnings, and Intercontinental Exchange trades at 25.77 times.

In spite of the rise in revenue at TradeWeb, net income decreased to $24.8 million for the quarter from $38.9 million the year prior, hit by a special stock-based compensation award of $20.4 million to TradeWeb management and employees following its initial public offering.

The company also recorded a notable increase in depreciation and amortization costs due to the spinoff of Refinitiv, its former majority-owner, from Thomson Reuters to Blackstone.

Refinitiv and the London Stock Exchange in July announced they would be merging in a $27 billion deal. Thomson Reuters is the parent company of Reuters News and a stakeholder in Refinitiv. (Reporting by Kate Duguid; editing by Jonathan Oatis)

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