May 9, 2019 / 3:15 PM / 4 months ago

CORRECTED-Tradeweb reports dip in earnings on higher expenses

(Corrects headline and lead to show that higher expenses overall outweighed higher revenue, not higher headcount expense; in penultimate paragraph adds details on increased GAAP expenses.)

By John McCrank

NEW YORK, May 9 (Reuters) - Tradeweb Markets Inc on Thursday reported a drop in earnings for the first quarter as higher expenses at the newly public electronic trading platform operator outweighed a jump in revenue.

Tradeweb, which focuses on electronic trading in assets such as government, mortgage, corporate and municipal bonds, as well as derivatives and ETFs, said it had net income of $42.4 million, or 19 cents a diluted share in the quarter ended March 31. That was down from $45.3 million, or 21 cents a diluted share a year earlier.

Stripping out one-time costs, the New York-based company said it earned 23 cents a share, a penny more than the mean estimate of analysts, according to IBES data from Refinitiv.

Revenue rose 10.2 percent to $186.8 million.

Tradeweb went public on the Nasdaq stock exchange on April 4, pricing at $27 a share. As of Thursday morning, the stock was at $40.99, up 2.7 percent from Wednesday’s close.

The fixed income market has moved toward more electronic trading in recent years, driven in part by regulation and as investors seek to knit together various sources of liquidity in a fragmented market.

“There is a constant march toward electronification in general,” Tradeweb Chief Executive Officer Lee Olesky told analysts on a call after the company released financial results.

Big banks have also scaled back their bond dealing in response to post-financial crisis rules that made such activity more expensive, creating a greater demand for electronic trading platforms like Tradeweb, and MarketAxess Holdings Inc, one of its main competitors.

Refinitiv has a controlling stake in Tradeweb. Thomson Reuters Corp , the parent of Reuters News, owns 45 percent of Refinitiv, with private equity firm Blackstone Group LP owning the remainder.

Tradeweb, which was founded in 1996 and trades interest rate swaps, credit, money markets and equities, has clients including banks, asset managers, retail brokers, insurance companies and central banks in more than 60 countries.

Total expenses surged 25.4 percent to $140.5 million, which included $23.2 million of acquisition and related depreciation and amortization expenses.

Adjusted expenses rose 9.5 percent to $116.7 million, due in part to a rise in headcount to 931 employees from 848 a year earlier. (Reporting by John McCrank in New York; editing by Matthew Lewis)

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