Q3 2024 Tradeweb Markets Inc Earnings Call
Okay.
Speaker Change: Good morning, and welcome to trade Web third quarter 2024 earnings Conference call.
Speaker Change: As a reminder, today's call is being recorded and will be available for playback.
Speaker Change: To begin I'll turn the call over to head of Treasury S. P N E and Investor Relations Ashley Serrao.
Speaker Change: Please go ahead.
Thank you and good morning, joining me today for the call Oh C O Billy Hult, who will review our business results and key growth initiatives and our CFO, Sarah Ferber, who will review our financial results.
Ashley Serrao: We intend to use the website as a means of disclosing material nonpublic information and complying with disclosure obligations under regulation FD.
Ashley Serrao: I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations and as such constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 Star.
Ashley Serrao: Statements related to among other things our guidance are forward looking statements actual results may differ materially from these forward looking statements.
Ashley Serrao: Formation concerning factors that could cause actual results to differ from forward looking statements is contained in our earnings release earnings presentation, and periodic reports filed with the SEC.
Ashley Serrao: In addition on today's call, we will reference certain non-GAAP measures as well as certain market and industry data.
Information regarding these non-GAAP measures, including reconciliations to GAAP measures in our earnings release and earnings presentation.
Ashley Serrao: Information regarding market and industry data, including sources is in our earnings presentation now, let me turn the call over to Billy.
Billy: Thanks, Ashley good morning, everyone and thank you for joining our third quarter earnings call.
Billy: This was another record quarter with revenues, surpassing our previous best by nearly 10% to approach almost 450 million in revenue.
Billy: Wrapping back the themes driving our results over the last few years remain unchanged.
Billy: First we continued to drive our market share higher than many of our markets as we collaborate with our clients to electronic fly and change behavior theater flagship swaps surging U S credit or rapidly expanding E M offerings.
Billy: Second we continue to capitalize on the trend of multi asset class trading almost 50% of our revenue growth continues to be generated away from our cornerstone rates business.
Billy: And third we continue to accelerate growth with targeted acquisitions and strong execution.
Billy: On this note we closed the ICD acquisition in August and formally welcomed the ICD team to the trade web family.
Billy: He has hit the ground running and early client feedback has been resoundingly positive both yield broker and rates and revenues are tracking ahead of plan and we completed the integration of Youll broker. This month five months ahead of schedule.
We continue to think it's a great time to be in their risk intermediation business.
Billy: Banks retreat from our markets global monetary policies diverge elections, Lim and fixed income markets continue to grow.
Billy: This creates lots of opportunities for our clients to trade to make money, while the environment fluctuates, we remain focused on driving durable growth by investing in our future by hiring the best talent deepening our client relationships and enhancing our technology.
Billy: Diving into the third quarter strong client activity share gains and a risk on environment drove 36, 7% year over year revenue growth on a reported basis, we continue to balance investing for growth and profitability as adjusted EBITDA margins expanded by 154 basis points.
Relative to the third quarter of 2023.
Turning to slide five our rates business was driven by continued organic growth across swaps global government bonds and mortgages and what.
Billy: It's also supplemented by the addition of race fan and Youll broker.
Billy: Credit was led by strength in the U S and European corporate bonds with our second highest quarterly market share across electronic U S high grade and high yield and was aided by strong growth across credit derivatives municipal bonds and China box.
Money markets was led by the addition of ICD and aided by continued growth in U S and European Repos.
Billy: <unk> posted double digit revenue growth, primarily led by growth in our global ETF business, whereas our equity derivatives business also posted solid growth.
Billy: Finally market data revenues were driven by growth in our <unk> market data contract and proprietary data products.
Billy: Turning to slide six I will provide a brief update on two of our focus areas U S treasuries and Etfs and then I will dig deeper into U S credit and global interest rate swaps.
Billy: Starting with U S treasuries record third quarter revenues increased by 33% year over year led by records across our institutional and wholesale client channels, our institutional business saw growing adoption of our streaming and RFG plus protocols, while the leading indicators of the institutional business remains strong.
Billy: Long, we gained share and achieved record quarterly market share of over 50% in U S treasuries versus Bloomberg, our second consecutive quarter above 50%.
Billy: Automation continues to be an important theme with institutional U S. Treasury AI acts average daily trades, increasing by nearly 30% year over year.
Billy: The wholesale space remains a key area of focus and we continue to prioritize onboarding more liquidity providers and enhancing our various liquidity pools as we deliver on our holistic strategy the.
The wholesale business produced record volumes led by record streaming volumes and growing adoption of our sessions protocol and the contribution of race fan.
Billy: Other protocols also saw double digit volume growth, particularly our club, which continues to trend higher.
Billy: Within equities, our ETF revenues grew over 20% year over year, our efforts to expand our equity brand beyond our flagship ETF franchise continued to bear fruit with third quarter institutional equity derivative revenues, increasing nearly 20% year over year.
Looking ahead, we continue to make inroads by integrating new clients and the client pipeline remains strong as the benefits of our electronic solutions continue to resonate. We believe we are well positioned to capitalize on the long term secular ETF growth story, not just in equities, but across our fixed income <unk>.
Billy: <unk>.
Billy: Turning to slide seven for a closer look at another strong quarter for credit.
Billy: Strong double digit revenue growth was driven by 37% and 14% year over year revenue growth across U S and European credit respectively.
Billy: We also achieved strong double digit revenue growth across credit derivatives, munis, and China bonds automation continues to surge with global credit AI acts average daily trades, increasing over 25% year over year.
Billy: We achieved our second highest fully electronic market share across U S. I G helped by I G block market share of over 8%.
Billy: We also achieved our second highest fully electronic high yield market share with record high yield block market share of nearly 5%.
During the quarter, we achieved a new monthly high yield record of 9% in July.
Billy: Our institutional business continues to scale as clients adopt our diverse set of protocols year to date, we estimate over 40% of our U S. Institutional variable revenue growth was driven by non market factors mainly market share.
Billy: Our primary focus on growing institutional RF Q continues to pay off with average daily volume growing over 45% year over year with strong double digit growth across both I G and high yield.
Billy: Moreover portfolio trading average daily volume rose over 50% year over year with growth of over 70% across I G portfolio trading and over 20% growth across high yield.
Billy: We continue to focus on leading with innovation and this is resonating with our clients leading to user growth of over 20% year over year retail credit revenues were up over 15% year over year as financial advisers continue to allocate investments towards credit to complement their buying of U S. Treasuries.
Billy: And retail certificates of deposits.
Billy: All trade produced a solid quarter.
Billy: With over 185 billion in volume up over 35% year over year, specifically, our all to all average daily volume grew over 20% year over year, and our dealer RF SKU offering grew over 25% year over year. The team continues to be focused on broadening out our network and increasing the.
Number of responders on the all trade platform in the third quarter. The average number of responses per all tall inquiry rose over 10% year over year. We also continued to increase our engagement and wallet share with ETF market makers with average daily volume up over 45% year over year.
Billy: Finally, our sessions average daily volume grew over 45% year over year.
Billy: Looking ahead U S credit remains a key focus area and we like the way we're positioned across our three client channels. We believe we have a long runway for growth with ample opportunity to innovate alongside our clients.
During the quarter, we enhanced our multi client net spotting offering based on client feedback expanded our P. T offering to include auto send capabilities and continue to see growing adoption of our RF <unk> edge offering.
Billy: In light of Basel III considerations. We're also focused on partnering with our dealer clients to help them more efficiently recycled their own balance sheet risk and earn more money.
Billy: We also remain very focused on chipping away at high yield and we believe we are well positioned to replicate the success. We've had in AG, we're making progress on sales hiring efforts and we have a strong pipeline of asset managers hedge funds ETF market makers and insurance companies that we are focused on with.
Billy: Aladdin, we're still in phase II of the integration, which is focused on the responding and initiating of all tall in our Q inquiries on the Aladdin screen early client feedback has been positive, particularly around the enhanced integration that allows our clients to more easily monitor all to all and dealer liquidity opportunities.
Billy: Beyond U S credit our E. M expansion efforts continue with early client success across Latin America, and the Middle East as we enter each region, our global product offering is proving to be a key way to develop relationships with clients and dealers.
Billy: On the product side, we remain focused on leveraging our diverse product expertise enhancing our integration with FX all in continuing to build out our holistic emerging market functionality.
Billy: Moving to slide eight.
Billy: Global swaps produced record revenues driven by a combination of strong client engagement in response to the macro environment continued market share gains and a better mix shift towards the risk trading.
Billy: Strength here was partially offset by a 1% reduction in weighted average duration that we are seeing positive signs on that front, given the changing macro environment.
Billy: All in global swaps revenues grew 51% year over year and market share rose to 22, 4% with record share across G 11, and E M denominated currencies.
Billy: The global macro backdrop continues to be influx during the third quarter, we saw global yields fall given the expectations for Central Bank rate cuts for example, U S German and Japanese 10 year yields fell 20% to 60 basis points during the quarter.
Billy: And in October we have seen those same yields rise significantly from the end of the third quarter.
Billy: This level of uncertainty continues to drive strong client engagement across our global suite of currencies and continued market share gains with our clients continued to pay off.
Billy: During the third quarter, we had 11 swaps currencies that saw year over year volume growth of over 100%. We had another 12 swaps currencies that saw volume growth between 50% and 100%.
Billy: In addition to the favorable macro year to date, we estimate that over 60% of our institutional variable swaps revenue growth was driven by non market factors mainly market share.
As short term rates are expected to fall further and as the yield curve Steepens. This should provide a tailwind to our risk based volume fee per million. As a reminder, our pricing is based on the amount of <unk>, one or the risk of client is putting through the platform, which is driven by two factors the level of yields and dura.
Billy: <unk>.
Billy: As rates fall or duration increases the D V O one of a trade increases based on the current rate environment. If we saw a 100 basis point drop in rates. This could lead to a risk based fee per million, increasing by 5% to 6%.
Billy: Additionally, our current risk based duration is about six years based on the historical fee per million levels. When our duration was about seven years, we could see a 6% to 7% increase in our risk based fee per million if duration extends by about a year.
Billy: Finally, we continue to make progress across emerging markets swaps and our rapidly growing RF M protocol, our third quarter E. M swaps revenues rose over 80% year over year, and we believe there is still significant room to grow given the low levels of electronic vacation.
Billy: Our RF and protocol saw average daily volume rise nearly 150% year over year with adoption picking up.
Billy: Looking ahead, we believe the long term swaps revenue growth potential is meaningful we are looking forward to providing solutions for more parts of the swaps market. The team is actively partnering with key buy side and sell side clients to make further inroads into the cleared swaps market and initial inroads into the bilateral swaps market.
Billy: With the overall swaps market is still about 30% of electronic side. We believe there remains a lot. We can do to help digitize our client's manual workflows, while the global fixed income markets and broader swaps market growth.
Billy: And with that let me turn it over to Sarah to discuss our financials in more detail.
Sarah: Thanks, Billy and good morning.
Sarah: I go through the numbers all comparisons will be to the prior year period, unless otherwise noted.
Sarah: Slide nine provides a summary of our quarterly earnings performance as Billy Recapped earlier. This quarter. We saw record revenues of 449 million that were up 36, 7% year over year on a reported basis and 36, 5% on a constant currency basis.
Sarah: We derived approximately 38% of our third quarter revenues from international clients and recall that approximately 30% of our revenue base is denominated in currencies other than dollars predominantly in euros.
Sarah: Our variable revenues increased by 50% and total trading revenues increased by 37%.
Sarah: Total fixed revenues related to our four major asset classes were up two 4% on a reported and constant currency basis.
Sarah: Credit fixed revenue growth was primarily driven by increases to our subscription fees and by the addition of new dealers this year.
Sarah: And other trading revenues were up 4%.
Sarah: As a reminder, this line fluctuate as it reflects revenues tied to periodic technology enhancements performed for our retail clients.
Year to date adjusted EBITDA margin of 53, 5% increased 111 basis points on a reported basis when compared to our 2023 full year margins.
Moving onto fees per million on slide 10, and I'll highlight the key trends for the quarter.
Sarah: You can see slide 16 of the earnings presentation for additional detail regarding our fee per million performance this quarter.
Sarah: For cash rates products average fees per million were up 1%, primarily due to an increase in Australian government bonds fee per million.
Sarah: For long tenor swaps average fees per million were up 17%, primarily due to a decline in compression activity.
Sarah: Duration in third quarter 24, it was relatively in line with the third quarter of 'twenty three.
Sarah: For cash credit average fees per million decreased 6% due to a mix shift away from your knees.
Sarah: Our cash equities average fees per million increased 9% due to a mix shift towards etfs, which carry relatively higher fee per million.
Sarah: Finally within money markets average fees per million increased 55% due to the inclusion of ICD and a slight increase in U S retail fee per million.
Sarah: Slide 11 details our adjusted expenses.
A high level, the scalability and variable nature of our expense base allows us to continue to invest for growth and grow margins. We have maintained a consistent philosophy here.
Sarah: Adjusted expenses for the third quarter increased 34% on a reported basis and 31, 5% on a constant currency basis.
Sarah: Adjusted compensation costs grew 36% the vast majority related to variable our discretionary spending.
Sarah: Just over 50% of the increase was performance related expense and nearly 20% from new hires in 2024, and the addition of ICD.
Sarah: Technology and communication costs increased 23%, primarily due to our previously communicated investments in data strategy and infrastructure, which we intend to accelerate to support our technology efforts as we continue to grow.
Adjusted professional fees grew 26%, mainly due to an increase in tech consultants as we augment our technology operations and build incremental scalability.
Sarah: We expect professional fees to continue to grow over time as they spend more on technology consulting to support our overall growth.
Sarah: Adjusted General and administrative costs increased 22% due to a pickup in travel and entertainment and marketing expenses, which was offset by favorable movements in FX that resulted in approximately $400000 gain in the third quarter of 24 versus a $1 5 million dollar loss in the third quarter of 'twenty three.
Sarah: Slide 12 details capital management and our guidance.
Sarah: On our cash position and capital return policy.
Sarah: We ended the third quarter in a strong position with $1 2 billion in cash and cash equivalents and free cash flow reached approximately 800 million for the trailing 12 months.
Sarah: Our net interest income of $15 $2 million decreased due to lower cash balances as we funded our recent acquisition of ICD with $771 million of cash on hand.
Sarah: Additionally, our net interest income was impacted by $970000 in accrued interest expense related to TRA payment.
Sarah: Excluding this interest expense, which occurs sporadically based on the timing of TRA payments. Our net interest income would have been $16 $2 million and our adjusted EPS would have been 76 cents.
Sarah: With this quarter's earnings the board declared a quarterly dividend of 10 cents per class, a and class B shares.
Sarah: Turning to updated guidance for 2024.
Sarah: In light of the continued strong business momentum, we are increasing our adjusted expense guidance to $855 million to $875 million. We are currently trending towards the midpoint of the range.
Sarah: Overall, we are seeing increased opportunities to invest for future growth and continue to expect accelerated investments going forward.
Sarah: All in with these investments we continue to expect our 2024 adjusted EBITDA margin expansion to exceed 2023 levels.
Sarah: We continue to expect our Capex and capitalized software development to be about 77% to $85 million for 2024.
Sarah: Acquisition, and refinish transaction related D&A, which we adjust out due to the increase associated with pushed down accounting is now expected to be $158 million.
Sarah: We continue to expect 2024, and 2025 revenues generated under the new Master data agreement with Al said to be approximately $80 million and $90 million respectively.
Sarah: Last quarter, we signed a 16 year lease for our New New York City headquarters, which is expected to commence in July of 2025.
Including expected double rent from our existing New York City office and other anticipated leasing activity in the second half of 2025, we expect our occupancy expenses to be approximately $7 million higher than the second half of 2024.
Speaker Change: Now I'll turn it back to Billy for concluding remarks.
Billy Recapped: Thanks, Sarah as a technology company focused on the financial markets, we thrive in change and complexity. We believe in our strategy of evolution and balance not revolution. We are excited about the opportunities to engage with our clients to expand our multi asset class footprint and we feel good about our long term future.
Billy Recapped: Growth outlook.
Billy Recapped: With a couple of important month and trading days left in October which tend to be our strongest revenue days October revenues are trending at record levels up approximately 30% relative to October 2023.
Billy Recapped: The diversity of our growth remains a theme, we're seeing strong volume growth across global government bonds mortgages, repos and corporate credit or October I G and high yield share are both trending lower than September levels are I G and high yield share are mainly being impacted by lower levels of industry P. T. So.
Billy Recapped: Far in October.
Billy Recapped: I would also like to welcome Daniel Maguire to our board of Directors, Dan brings more than 25 years of experience in financial services, having known Dan for a long time, I think very highly of him I am confident that he will make a significant impact as we expand our footprint and broadened the boundaries of innovation and trade web finally.
Billy Recapped: I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter and I want to thank my colleagues for their efforts that contributed to the record quarterly revenues and volumes at trade web with that I will turn it back to Ashley for your questions.
Ashley Serrao: Thanks, Billy as a reminder, please limit yourself to one question only feel free to hop back in the queue and ask additional questions at the end operator, you can now take our first question.
Speaker Change: Thank you at this time, we will conduct the question and answer session to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from Chris Allen of Citi. Your line is now open.
Chris Allen: Good morning, everyone. Thanks for taking the question.
Chris Allen: Just wanted to ask on credit we've had increasing questions as to how trade wars platform has been evolving from here relative to market access was called out specific new developments on their platform just in terms of their enhanced algo suite.
Chris Allen: The old protocols improved trading front and some of these developments are great catch ups to trade web others looks to position them for increased <unk> penetration, so it'd be great to hear how trade over stacking up here and how that how you are positioned for increased block penetration moving forward.
Billy Recapped: Sure Hey, Chris how are you it's Billy.
Speaker Change: Yankees one last night, so how many good mood or most of us are treated with very good news.
Billy Recapped:
Billy Recapped: I kind of think about sort of the markets Chris that we're in I always kind of describe it as sort of run this continuous journey of learning on that is how we think about and describe our business and when we think about.
Billy Recapped: The journey around our credit business I think at the beginning of that journey started.
Billy Recapped: Four or five years ago from our perspective.
With some open questions can we really compete in credit do we understand the credit business the right way.
Billy Recapped: And then you kind of like flash forward to today.
Billy Recapped: Really we're kind of neck and neck.
Billy Recapped: In the <unk> business as a market leader in this space and I think that says.
Billy Recapped: A lot like over the last two years.
When you think about the protocols that we're in.
Billy Recapped: Our RFP you.
Billy Recapped: Volume was up over 200, 210% of our portfolio trading these are like massive numbers up over seven.
Billy Recapped: 700% or all to all is up over 130% in our sessions business our suite business.
Billy Recapped: <unk> also has done extremely extremely well so the.
Billy Recapped: From our perspective.
Billy Recapped: It remains unchanged.
Billy Recapped: We do something I think that I'm very proud of we respond to client feedback very very well and so from our perspective in credit that's launching what we call <unk> edge, which offers really top tier analytics dealer upsize, which promotes block trading.
Billy Recapped: And we continue to enhance.
Billy Recapped: Our portfolio trading workflows.
So it's a process and I kind of see this I think in a very clear way, while we are very strong leaders around innovation.
Billy Recapped: From our perspective, sometimes adoption is.
Billy Recapped: He is crucial and so the blocking tackling of sort of delivering what we've built through our most important clients.
Billy Recapped: <unk> continues and as we do that obviously there is this kind of a dual approach around improving our technology our user interface.
Billy Recapped: Providing advanced analytics and doing the hard work around delivering best in class technology chain, Chris like Super focused.
Billy Recapped: Really really proud of them and we're going to continue to stay focused in this area.
Perform really well.
Billy Recapped: So appreciate the question and thanks very much.
Billy Recapped: Thanks.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Bill Katz of TD Cowen. Your line is now open.
Bill Katz: Okay. Thank you very much for taking the questions and good morning, everybody I. Appreciate all the disclosure maybe just that I know one question, but just one clarification just 1 billion in terms of your commentary around fee per million given the duration and the curve so to make sure thats all both incremental so it will be 5% to six plus 6% to 7% to make sure I heard that correct.
Bill Katz: And then the broader question I have just sticking on competition for a moment I guess one of your competitors market access is linked up with ice.
Bill Katz: To potentially expand their trading in credit as well I was just wondering if you could address that and maybe the broader question is as private markets continue to get a bigger role in capital markets. How does that affect the long term algorithm for growth. Thank you.
Speaker Change: All good questions. So you take the first one I just want to make sure we clarify thank you.
Speaker Change: You heard it accurately.
Speaker Change: Thats correct.
Speaker Change: And then maybe you want to go to private credit.
Speaker Change: Listen I don't really have a huge comment on what.
Speaker Change: Kind of what market access is doing.
Speaker Change: With ice I mean, we obviously.
Speaker Change: Have levered, our our retail business and that's given us an advantage and to credit for a long time feel really good about that I've always kind of like thought and taken the approach like really like live and breathe and understand your clients obviously, the super aware of the competitive landscape, but I really don't have.
Speaker Change: Massive comment on on what Theyre doing with with ice, but it's a.
Speaker Change: Good question.
Speaker Change: And so kind of like on that theme just in terms of private credit for a moment.
Speaker Change: Focus on existing business.
Staying in front of clients.
Speaker Change: On their most important themes in and execute really well and then how do you kind of pivot into creating new opportunities in adjacent markets like this evolution from kind of paper markets two more.
Speaker Change: Transparent markets, that's the sort of like lines on this company's hand, thats kind of like who we are so from our perspective I think.
Speaker Change: In the private and the private market area lots of headlines and I think one of the development for sure that we have our ion is apollo's launch of an ETF.
Speaker Change: <unk> kind of public and private credit and indulge in conjunction with State Street, I think that's sort of like worth following.
Speaker Change: Apart from the worlds of kind of private and public credit converging, which is a first.
Speaker Change: It's especially interesting around what we would say is a policy commitment to provide liquidity in today in the form of execute executable firm.
Speaker Change: That's worth watching and working kind of thing and so as I say that I think what I'm, describing sounds very similar to the markets that trade web kind of lives and breathes Zen and what we have seen happened multiple times in the fixed income markets and where we have tended to play a leading role in collaborating with our clients to develop and <unk>.
Speaker Change: Proved secondary market trading so what you get from US is this day in and day out rigor on our existing businesses in existing marketplaces, and then the kind of ayes on expansion and so we're clearly watching what's happening in that space.
Speaker Change: With open eyes.
Speaker Change: All good questions and I appreciate it.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for.
Speaker Change: Your next question.
Speaker Change: Our next question comes from Richard Phelan with Gerry.
Speaker Change: Your line is now open.
Richard Phelan: Hey, good morning, I wanted to ask about expenses.
Richard Phelan: Adjusted EBITDA margin expansion remains pretty solid year to date versus the 50 basis points last year, maybe just on the longer term outlook could you remind us how you think about expense growth and margin expansion as we start to think about the next few years. Thanks.
Richard Phelan: Sure. It's Sarah Thanks for your question Richard.
Sarah: And when we talk about expenses I think it's always helpful to take a multiyear view.
And so if you looked at our historical growth just as a baseline from 16 to 23 I will take this year out for a second we averaged about 10% year over year growth.
If you looked at that period, you would know and obviously you spent a lot of time on is it's not linear and it depends that expense growth really depends on what the revenue growth environment is business investments that we're making and so within that average of 10% we've seen lows of 4% in certain years and 19 as an example and high.
Sarah: The 15%.
Sarah: Based on environment and also things like acquisition.
Sarah: So when we're looking forward.
Sarah: Bring it forward to the current quarter No better example, I think.
Sarah: Fee and expense growth of about 25% well above our historical average.
Sarah: Really makes sense given the strong environment that we're in a strong topline performance and then you factor in two acquisitions that we've made this year and some of the accelerated investments we've talked about previously so.
Speaker Change: One of the big things as you think about going forward Thats helpful to unpack as the biggest driver of our expense growth is typically com.
Speaker Change: Take this quarter, 70% of the comp growth as an example is discretionary or variables you really see the flexibility in our operating model.
Speaker Change: It's performance related compensation or new hiring with at our discretion and obviously the inclusion of ICD.
Speaker Change: We typically give our guidance out next quarter and we'll continue to follow that cadence.
Speaker Change: But there are a couple of things that you're thinking about 2025 worth calling out some of which we did call out in our prepared remarks, one is ICD, obviously theres seven months of incremental expense.
Speaker Change: And that acquisition.
That's about $35 million to factor into your models and then the second is higher occupancy expense. We are moving our New York headquarters next year and given the overlap in rent.
Speaker Change: Larger footprint will have with highlighted about $7 million in the second half of next year and expect as an uptick in those lines.
Speaker Change: Beyond that.
Speaker Change: What I will say is given the operating leverage of the business. We do expect to have margin expansion. We're still committed to that we obviously want to balance investing for growth with scaling the platform.
Speaker Change: I would expect that margin expansion to be slightly more muted given some of the things I just called out.
Speaker Change: But we maintain a lot of flexibility.
Speaker Change: Kind of demonstrated that track record throughout the year.
Speaker Change: That helps and we'll obviously formula of expense guidance. Thanks.
Speaker Change: Thanks.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
One moment for our next question.
Speaker Change: Our next question comes from Alex <unk> of Goldman Sachs. Your line is now open.
Hey, good morning, everybody. Thank you for the question.
Speaker Change: I wanted to talk for a minute about fee per million trends in the interest rate swap business. There are a number of cross current and that business, obviously volumes clearly very strong.
Speaker Change: Duration shifting around a little bit and compression trading can kind of swing things up and down as well so but all in.
Speaker Change: Put up over $3 per million in swaps or one year. How do you think about I guess the trajectory there from here and maybe a broader comments on revenue growth algorithm in this business over the next one to two years. Thanks.
Speaker Change: Good question Alex.
Speaker Change: So maybe like starting point I would say.
Speaker Change: Very confident about the long long term growth potential of that business like starting with that only 30% of the market is currently electronic side.
Speaker Change: So from our perspective out of central casting that kind of leaves plenty of room for how we think about expansion there so big area of focus for the company.
Speaker Change: Driving revenue growth by further electrifying existing client flows like out of our playbook and continuing to onboard new clients globally.
Speaker Change: I don't want to say like rather than be concerned with the fluctuations and to your question because they are a really good question is as youre understanding our business, but like that sort of becomes the kind of focus of the company and so.
Organic growth initiatives that I would kind of highlight for you first I would say.
Speaker Change: The inroads and the success that we've had in the second thing I would say that request for market protocol that micro protocol or a family or a big one I'll give the international team a tremendous amount of credit for that is really understanding the most sophisticated clients workflow and then replicating that.
Speaker Change: In a way that works works for them and works for US that's a pretty big deal.
Interestingly I think these kinds of growth initiatives carry a higher fee per million. So I would kind of like when you get back to you that way.
Speaker Change: To address maybe for a second your specific question about the kind of the fee per million outlook.
Speaker Change: On a macro level I think several factors, obviously could influence that moving forward and I kind of called some of them out in my in my prepared remarks, Alex, but what I would say as clients continue to focus on the shorter end of the curve.
Speaker Change: And we haven't observed sort of increase in duration yet.
Speaker Change: If interest rates decline my instinct is and I think the house view instinct is we may see clients trading more at the longer end of the curve.
Potentially boosting duration, so I would kind of highlight that to you and then obviously additionally, the rate outlook and duration are negatively correlated so if rates fall the duration of the same bond or tenure increases I don't want to go into like bond 101, but you know that better than I do.
Speaker Change: I think maybe maybe one of the more important things I could say is we are seeing.
Speaker Change: Strong risk trading so far in October with.
Speaker Change: With swaps seeing revenue growth.
Speaker Change: In excess of over 40% year over year. So I wanted to make sure I kind of like describe that to you in a very straightforward way. So continue to stay kind of very optimistic about the outlook heading into 2025.
We talked a lot about kind of compression trades throughout sort of 'twenty four.
Speaker Change: It was.
Speaker Change: A strategic move on our part to get into certain clients and kind of get into more of their kind of risk trading flow and so from our perspective, the way that we've been able to do that has worked so.
Speaker Change: So we don't kind of back away from the strategy of making sure that we handle those kind of trades when the market dictates that that's a real tactical move from us that I think.
Speaker Change: <unk> paid off.
Speaker Change: So feeling good about the trajectory of that business Alex and.
Speaker Change: I appreciate the questions hopefully I answered them well great.
Speaker Change: I'd just add because I think.
Speaker Change: This point in his remarks, but it helps to quantify kind of what I was highlighting is this algorithm.
Speaker Change: Think about that duration increase and you're talking about rate drops.
Speaker Change: One year increase in duration in our global swaps business, maybe going from 10 to 11 increases fee per million by 9%. So it gives you some sense of magnitude and similarly, you mentioned I think in his prepared remarks that drop off rates by 100 basis, 0.5% to 6% you can see the flexibility in sort of.
Speaker Change: The underlying strength going forward around those moves.
Yes, that's super helpful. Thank you both.
Speaker Change: Thanks, Alex.
Speaker Change: Thank you. Our next question comes from Michael Cyprus with Morgan Stanley. Your line is now open.
Hi, Good morning, Thanks for taking my question I just wanted to ask about ICD with the deal now closed I was hoping you could elaborate a bit on how you expect this to contribute to revenue and earnings as you look out over the next couple of years, what sort of steps might you be able to take to help accelerate the growth of the ICD business over the next couple of years now what might be some of the low hanging fruit versus what aspects.
Speaker Change: Might be a bit harder or take a bit longer to achieve and then just more near term what might be some of the opportunities to offset any potential slower demand for money funds with the right path expected to move lower.
Speaker Change: Great. Thanks, so much for the question.
Speaker Change: To reiterate I know, we said this last quarter. We were so pleased to have ICD be part of the tradeoff of family in particular really pleased with the collaboration of that management team with our management team. It's been a seamless transition since we closed the deal.
Speaker Change: Opportunities to accelerate we've talked about this but I think it really falls into two buckets.
Speaker Change: Low hanging fruit sort of more near term bucket, we see an opportunity to really expand icd's reach globally, given our footprint and our sales force.
Speaker Change: So really penetrate more client internationally as well as domestically across financial firms. So I'd say that is probably if there is low hanging fruit the low hanging fruit because it is not dependent on technology build so thats more near term and obviously that's already underway.
Speaker Change: The second piece is really expanding icd's product offering on their portal.
Speaker Change: And tapping into cross sell where we're putting our trade web products and making them available so things like U S. Treasuries would be the first that we're going to start with that build is underway. We expect that to go live in the first half of next year. So that's a little bit longer because you do you want to wait for that technology build.
Speaker Change: The good news is the dialogue with our clients is robust and actually quite specific.
Speaker Change: There have been a number of flash surveys that we've done.
Speaker Change: 65% of ICD clients have expressed interest in buying U S. Treasury. So we're not building it and hoping that they are anticipating we're really building. It based on informed dialogue that both teams are having on a coordinated basis with our client base. So I think those are maybe the two biggest pockets to highlight around opportunities to accelerate.
Speaker Change: The second part of your question is how do you feel about the rate moves rates coming down, which obviously doesn't mute growth I think there are a couple of interesting trends, sometimes a little bit counterintuitive.
Speaker Change: One is we expect and what you see if you look back on industry trends.
Speaker Change: The demand from money markets actually increases as rates decline.
Speaker Change: This is because typically corporate treasurers are making a decision between money markets and think deposits around the short term liquidity and as those rates get cut the premium that money market funds offer relative to bank deposits actually is higher than deposits reprice lower faster is another way of saying it in money market funds.
Speaker Change: Have a longer duration, so we actually see money market typically acquire and be more attractive in that declining rate environment, but obviously as rates are lower that doesn't mute some of the impact I think fundamentally on a secular basis corporate cash is probably the biggest driver of how this business performs and we think that's healthy we see.
Speaker Change: It's having excess cash generation and we think the demand for money markets is pretty stable.
Speaker Change: The go to.
Speaker Change: Go to option around liquidity and yield and we think the underlying health of the corporates are there. So I think overall, obviously really excited but eyes wide open on the environment I think we have a lot of levers to Brazil.
Speaker Change: Great. Thanks, so much thanks.
Michael Cyprus: Thanks, Michael.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Dan Fannon of Jefferies. LLC. Your line is now open.
Dan Fannon: Thanks, Good morning.
Dan Fannon: Really a question on portfolio trading competition with us within this protocol has been increasing you'd have some industry participants doing.
Dan Fannon: Trades for free while pricing Hasnt changed at a headline level, how are you thinking about pricing pressure over time.
Speaker Change: Yeah, Hey, Dan how are you.
Dan Fannon: Good question.
Speaker Change: We would say competition competition is good for the market. When we were when we were the ones chasing.
Speaker Change: And now that we're the ones being chased we say competition is good for the market.
Speaker Change: Now there is that expression kind of.
Speaker Change: You get better through through competition, and I think that.
Speaker Change: The competitive landscape and most importantly, the clients.
When I don't know its like Iron Sharpens iron kind of like that that's how we think about the world. So no areas of competition.
Speaker Change: Catches us.
Speaker Change: Off guard and our brand as you know very well I think is built on value creation and innovation and Thats, how we aim to lead and win share I think the maybe.
Speaker Change: Maybe the important thing for a moment to appreciate.
Speaker Change: Obviously, you like prices and everything and we've learned that in rates.
Speaker Change: In the right space competing against Bloomberg and charging.
Speaker Change: Charging for the value we create.
Speaker Change: Maybe stating the obvious a little bit I think when the landscape uses fee holidays or are they rely on fee holidays, we think thats a short term fix.
Speaker Change: In portfolio trading we have been I think from my perspective quite thoughtful about pricing.
Speaker Change: And we have clients that are very willing to pay for what we would describe to you is unique workflow customization unique functionality like net spotting.
Unique technology, such as being able to execute the most line items in a trade.
Speaker Change: So.
Speaker Change: We feel good about where our pricing model is as Dan to say that very straightforward.
Speaker Change: Maybe kind of deep down I would say my instinct is that.
The competitive landscape as we will eventually kind of rationalize their pricing and kind of grow out of these fee holidays, I think thats, what we would kind of expect and so the important thing I think is to appreciate that from our perspective.
Speaker Change: Portfolio trading.
Speaker Change: Is here to stay.
Speaker Change: And poised to increase significantly.
So theres going to be plenty of volume to be shared in a competitive market, it's that expression about the bigger.
Speaker Change: The bigger the pie gets.
Speaker Change: I think our instinct is our slice is going to be quite big So we feel good about our position obviously laser like continue to focus on the future and state of portfolio trading which from our perspective is going to be more about this kind of like I said like in the last question like adoption continued.
Speaker Change: Work around adoption better analytics and advancements in kind of that.
Speaker Change: Use cases of it all.
Speaker Change: Good to hear your voice and good question. Thanks.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Kyle Voigt of K B W. Your line is now open.
Speaker Change: Hey, good morning.
Kyle Voigt: So with ICD now closed you still have excess cash on the balance sheet.
Kyle Voigt: No debt capital flexibility.
Speaker Change: We're thinking about the future.
Speaker Change: For capital deployment M&A can you talk about your willingness to execute on M&A, while still in the process of integrating ICD and also if you could share whether there are any notable asset classes, our client segments, where you feel like there you are still under penetrated but we're there could also be synergy with the broader trade web platform.
Speaker Change: Sure.
Speaker Change: Thanks, Carl excellent question I was going to kind of be sort of a little bit of me and Im sure Youre going to Youre going to follow me on this first thing I want to say if you want to give Sarah like a ton of credit for adding like a tremendous amount of rigor through the organization.
Speaker Change: Innovation over the last couple of years as we've done.
Three different acquisitions and really worked.
Very hard at integrating them in a way.
Speaker Change: That kind of works for us and I think doing those kinds of things leads to more opportunity. So I would start with kind of saying.
Speaker Change: As our organic growth remains really strong RV.
Speaker Change: Obviously M&A is going to be continued to be our preferred use of cash and so I think we are.
Speaker Change: Maybe quietly or a little bit beneath the surface building quite a solid track record of executing on these deals efficiently and creating value and so that's my point around a dimension that Sarah has added to the company.
Whether or not thats the yield book yield book yield broker integration, which is ahead of schedule I think <unk> is a big one for us and that integration is also progressing faster than we expected.
Sarah mentioned, obviously like excited to close the ICD acquisition this past quarter.
Speaker Change: The teams have very quickly ramped up efforts to expand ICD sales business.
Speaker Change: Long term I think it is crucial to continue to make these kind of like strategic bets.
Speaker Change: To enhance client experience.
Speaker Change: Those bets are kind of very important bets for the company and Thats about kind of.
Speaker Change: <unk> future growth something that we feel very strongly about let me hand, it maybe to you for a second I'm sorry, because I appreciate that.
Speaker Change: I would think we remain active in exploring deals in the market. It is an active market.
Speaker Change: <unk> focus on integration, but we think we can obviously do both at the same time I'd also highlight that on an inorganic basis.
Speaker Change: Look at things beyond outright acquisition continue to explore several minority investments that we've completed particularly in the digital space and partnerships. There. So I think there are a lot of levers and we have the bandwidth to execute well on all of those but obviously.
Speaker Change: Our focus is on integrating.
Speaker Change: Really well in the near term.
Speaker Change: More broadly just in terms of capital management, Theres really no change I feel like I'm, a broken record. So there's no change in our philosophy here first priority of investing organically in the business opportunities that we see in those we've talked about.
Speaker Change: M&A second top priority for cash and then we follow it with buybacks and dividends.
Speaker Change: On the buyback same philosophy, we typically use that to offset dilution from stock based compensation.
Speaker Change: We said, we will continue to be opportunistic with repurchases with an eye towards EPS accretion dilution obviously.
Speaker Change: I want to be thoughtful there and then I guess just on the dividend.
Speaker Change: Over the last couple of years, we've increased our dividend by 25% given our strong earnings and free cash flow growth and I expect the board continues to evaluate that based on a number of factors, but clearly we'll factor in our earnings and free cash flow growth.
Speaker Change: Look at that strategy going forward.
Thanks, so much thank you.
Speaker Change: Thank you.
Speaker Change: Next question comes from Patrick Morley of Piper Sandler Your line is now open.
Patrick Morley: Yes. Good morning, Thanks for taking the question.
Patrick Morley: One on the rates business Bill you talked in your prepared remarks, a little bit here in Q&A on the strength youre seeing in swaps.
Patrick Morley: So was just hoping you could expand on that and talk about maybe what you're seeing across the rest of the rates franchise and then additionally, just broadly given the environment and the rate outlook.
Patrick Morley: Would you say that youre seeing velocity pick up across your markets. Thanks.
Yes, Patrick good question, so like I think it's a good time to be in the rates business, let me kind of say that.
Speaker Change: Very in a very clear way you have.
Speaker Change: A real rate environment, then you kind of think about the fact, obviously that the debt markets are growing central banks are not the kind of buyers in the market that they were and so private sector intermediation is back wallet, while it is growing and so we think thats.
Speaker Change: Good environment for us and so I think it was like third quarter 'twenty for our treasury market volumes are up over 30%.
Speaker Change: Variable revenues up over or close to 50%.
Speaker Change: Rates swap market volumes up 30% with those variable revenues up over 60% mortgage market volumes, which I think is an important thing for us to continue to track up 20% variable revenues up 25%. These are kind of like very strong indicators of why it's good to be in.
Speaker Change: In the rates business.
Speaker Change: Or the risk intermediation business, if you're one of the banks.
Speaker Change: I would make around the velocity of it all I would make.
Speaker Change: Continued point around obviously the strength of the alternative market makers continuing to play a significant role in these businesses.
Speaker Change: I've highlighted firms like citadel in the past my instinct is we're going to continue to have more of that and then a sort of more modernized version of the strongest players in the space historically, which are the big banks from our perspective, that's a convergence that's going to continue to lead into more of a lawsuit.
Speaker Change: More velocity plus you factor in obviously continue and growing level of sophistication with the buy side community, which has obviously been the kind of like gas in the engine around our Aif protocol and these are like pretty strong signs that velocity is going to continue to amplify.
Speaker Change: By an increase in this space.
Speaker Change: And thanks, Thanks, a lot for the question.
Speaker Change: Thank you.
Speaker Change: Next question comes from Benjamin <unk> of Barclays. Your line is now open.
Speaker Change: Hi, good morning, and thanks for taking the question.
Benjamin <unk>: Wanted to ask about the mortgage business. So rates have generally been falling we've seen the business come to life, a little bit can you kind of talk about what youre seeing there under the surface and then how important are sort of continued a continued decline in rates to growth in that business as you see it looks like in October at least sort of averaged 30 year rate is picking back up. So do you think that is that important or what are they.
Benjamin <unk>: Or what are the other kind of important drivers to tape out for mortgages in particular.
Dan Fannon: Dan It's a good question is kind of like.
As rates drop or when rates drop more I think we want to think about it as kind of a straightforward obviously our expectation is that straightforward.
Dan Fannon: Mortgage volume will increase and obviously as you know very well that's a business that we have a very strong kind of leadership role and whether or not that's in the client client dealer channel or the wholesale channel and then maybe what I would say is as importantly, I. Thank you.
Dan Fannon: You kind of enter into the zone of how we describe our think about convexity hedging and so we would expect to see.
Dan Fannon: A further increase in volume from kind of mortgage and users into the swaps market and we think that has a driving force for our swap volumes going forward. So it's a little bit of a combination of straightforward mortgage volume cost, maybe a amplification into the swap space.
Speaker Change: And then I would say maybe kind of like in a world where you try to hit on all cylinders, but obviously you guys know better than I do.
Speaker Change: That can be a hard thing to do I think as a company we're going to have a continued effort around specified pools, which we think is an important piece of that market. There are a lot of aspects of that market that from our perspective have some.
Speaker Change: Sort of ability to replicate what we've done in credit they tend to trade on bid lists and offer lists theres a comment there's a concept around portfolio trading that from our perspective exists around <unk> more work for us as a company to do there and we think of that as an opportunity given <unk>.
Speaker Change: Strong strong foundation and reputation that we have in the overall mortgage business.
Speaker Change: Got it thank you very much.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from Ken Worthington of Jpmorgan. Your line is now open.
Ken Worthington: Hi, good morning, Thanks for taking the question.
Ken Worthington: So it's been a great year for activity levels, maybe another great year across your major asset classes.
Ken Worthington: Are you seeing the potential for rates high grade high yield activity for next year is greater industry activity levels do you see it as being possible is it likely.
Ken Worthington: Which of your flagship products do you think you have the greatest conviction that you can see better industry volumes in for next year, if activity levels become more challenged where do you see the potential for increased market share from here.
Ken Worthington: To be able to.
Most likely offset any potential for weaker activity levels.
Speaker Change: Hopefully that makes sense, yes, I mean, I think it's interesting I'll start with the back half of your question I'm not great at forecasting market, but I don't want to be in that business, but what we do spend a lot of time on is making sure the portfolio of businesses we have.
Speaker Change: Our forums and gains in market share.
Speaker Change: What kind of environment.
Speaker Change: I think one of the things that gives us a lot of confidence and I know Billy mentioned at all in terms of his remarks or would you kind of go through different asset classes.
Speaker Change: The rates business as an example, it's been a tremendous market environment for our rates business.
Speaker Change: And in particular swap that said when you look at the growth numbers that we've put up in terms of swap 60% of that growth has come from what we would say increases in market share either adding new client existing client increasing penetration as opposed to.
Speaker Change: Just market volume and so that when we think about the algorithm of how we grow this business we start to try to unpack, what's happening just purely in the market versus what causing us and how can we increase our market share.
Speaker Change: Above and beyond industry volume. So you can do that analogy and credit as well I think that that's probably about 40% away from the healthy market volumes and so I think that gives us a lot of confidence obviously the growth rates, we put up are quite significant and so 40 or 60% depending on the range.
Speaker Change: It's still an incredibly high well over that double digit growth rate that we target on a long term basis, I think thats about answer I'd say like a little bit can sort of in a way that we would think about it like feeling pretty strong and as we get into next.
Speaker Change: Next year sort of more continued ample.
Amplification of volume in the mortgage business and then a little bit to your question around like where is the market share.
If the volume slow slowdown I think I think Sarah hit that I think when you think about the all in interest rate swap.
Speaker Change: Electronic vacation still being pretty low in the history for the company around doing these kind of micro innovations that take phone use onto trade web we feel pretty confident there. Other thing I would say is both Sarah and I mentioned sort of the right fit into.
Speaker Change: <unk>, which we think is critical around both our institutional treasury business plus an amplification into our wholesale treasury business, we think we're going to.
Speaker Change: Pick up market share in that space sort of.
Speaker Change: Our list of where industry volumes go so that would be a little bit about.
Speaker Change: Sort of a blueprint for us around where we think we have the ability to continue to pick up market share both competitively plus that phone based market share and then I'd say like one of the areas I just call out specifically that we're extremely confident about that.
Speaker Change: That's the only one that I wanted to talk about.
Speaker Change: Yeah, we have seen a consistent track record in terms of the electronic application of those markets, particularly <unk> swaps, which set a core of our franchise.
Speaker Change: We're run rating that business of $60 million, but that market is clearly going in one direction.
Regardless of what happens with rates or inflation, the electrons vacation in that space and our investment in that space. We're extremely confident we will capitalize on where that market is headed.
Speaker Change: Wonderful. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Next question comes from Alex Kramm of UBS. Your line is now open.
Alex Kramm: Yes, Hey, good morning, everyone I know, it's late in the call.
Alex Kramm: Actually one quick housekeeping question before I don't know if you clarify if that's a 30% increase in revenue in October they talked about is that an organic number because I think ICD ads I think high single digits. So maybe maybe clarify that but then just coming back to the credits commentary I know a lot of.
Alex Kramm: Detail on what Youre doing earlier in the call, but I just wanted to bring it back to the numbers for a second because if I look over the last five six quarters or so yes your market share in credit is up.
Alex Kramm: Little bit, but it seems to have all come from PT and that's obviously a little bit more under attack and if you look at.
Alex Kramm: Our SKU you all trade those those market shares have been really flattish so given that you're signing up new institutional investor clients I think up almost 10% like are those people not really contributing or why why is it take up in those traditional segments not really happening outside of PT.
Alex Kramm: Thanks.
Speaker Change: Sara I'll take I'll take the housekeeping question and so the 30% that we highlighted in our remarks is an all in revenue growth rate, but even if you strip out acquisitions, we're looking at 25% organic growth rates are still strong.
Speaker Change: In October and then maybe I'll transition ability on the other part sure.
Speaker Change: And I've said, Alex when we opened up the call that I was in a good mood because the Yankees, one and Thats a very good question and it's certainly not going to put me in anything other than that given an equally good mood.
Speaker Change: <unk>.
Speaker Change: Look you.
Speaker Change: You're asking a really good question and I know I made an interesting point I think around how we view how we view competition in this space, what I would say to you in a very straightforward way.
Speaker Change: Kind of inroads that we've made are never perfectly kind of straight lines. So I don't want you to kind of over read one month versus the next month, and then kind of form a theory on that I think the track record around kind of innovation.
Speaker Change: As obviously quite good and I think the way that we are able to kind of presenting to the market. These different protocols I think works period.
Speaker Change: We have a very strong view that the credit market wants a more balanced environment I think we've done a very good job of bringing the banks back into the equation, obviously, we've differentiated ourselves along the way through ports.
Speaker Change: Portfolio trading through net spotting and hedging and I think we're going to have further room to grow and succeed in some of these kind of traditional protocols that you mentioned, if I were going to sort of tell on myself for a moment and maybe what I would say is.
Speaker Change: We're always looking for sort of like the things that aren't working as well is that we want them to work I mean always as a company I think that's a really important ethos that kind of Sir NII kind of live by bringing your problems, what's not working and so continuing to build out our responder network.
Speaker Change: In the all to all market will remain a big focus for us as a company and I think we are coming now from a position of strength, where we feel quite comfortable that we're going to able to put the resource into the market to allow us to continue to succeed at a high rate.
Speaker Change: We welcome competition, obviously, we think that's going to continue and I think the buy side client continues to benefit from the way that we're putting resources into the market and look forward to how things will continue to develop.
Speaker Change: Feel good about it.
Speaker Change: Great questions as always and thank you.
Speaker Change: Fair enough thanks, very much for the additional color.
Speaker Change: Yes.
Thank you.
Speaker Change: We ran over the 16 minutes.
Speaker Change: So this will conclude the question answer session I would now like to turn it back to Billy Hult CEO for closing remarks, great.
Billy Hult: Thank you all very much for joining us. This morning, great questions from a great group as always if you have any follow up questions feel free to reach out to Ashley Samir and the team.
Billy Hult: <unk> have a great day, everyone. Thank you.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Okay.
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