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CORRECTING and REPLACING Tradeweb Reports Third Quarter 2023 Financial Results

The first line under OTHER MATTERS, Updated Full-Year 2023 Guidance* should read: Adjusted Expenses: $670 - 695 million (instead of Adjusted Expenses: $670 - 659 million).

The updated release reads:

TRADEWEB REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS

Tradeweb Markets Inc. (Nasdaq: TW), a leading, global operator of electronic marketplaces for rates, credit, equities and money markets, today reported financial results for the quarter ended September 30, 2023.

$328.4 million quarterly revenues, an increase of 14.4% (12.5% on a constant currency basis) compared to prior year period

$1.4 trillion average daily volume (“ADV”) for the quarter, an increase of 29.6% compared to prior year period; quarterly ADV records in fully electronic U.S. High Grade credit, global repurchase agreements, Chinese bonds and swaps/swaptions ≥ 1-year; record 16.6% share of fully electronic U.S. High Grade TRACE and a record 7.8% share of fully electronic U.S. High Yield TRACE

$111.6 million net income and $130.8 million adjusted net income for the quarter, increases of 36.9% and 22.8% respectively from prior year period

51.9% adjusted EBITDA margin and $170.4 million adjusted EBITDA for the quarter, compared to 51.0% and $146.3 million respectively for prior year period

$0.46 diluted earnings per share (“Diluted EPS”) for the quarter and $0.55 adjusted diluted earnings per share

$0.09 per share quarterly cash dividend declared; $4.9 million of shares repurchased

Billy Hult, CEO of Tradeweb:

“Tradeweb delivered record third-quarter revenues, as heightened focus on fixed income and a sustained period of high interest rates dominated institutional, wholesale and retail client sectors. Reflecting the breadth of Tradeweb’s business, our nearly 30% year-over-year increase in quarterly ADV was fueled by strong volumes in rates, credit, equities and money markets. We continued to grow market share in credit, where our record share of fully-electronic U.S. High Grade TRACE increased by 263 bps compared to the prior year period – and has more than quadrupled over the past five years. We made continued progress against our strategic growth priorities with the closing of the Yieldbroker acquisition during the third quarter. Today, we also announced a new licensing agreement with LSEG Data & Analytics (Refinitiv), allowing LSEG to distribute our market data while providing Tradeweb with increased revenue and flexibility as we grow our market data offering.”

SELECT FINANCIAL

RESULTS

 

3Q23

 

 

3Q22

 

Change

Constant

Currency

Change(1)

(dollars in thousands except per share amounts)(Unaudited)

 

 

 

 

 

 

GAAP Financial Measures

Total revenue

$

328,357

 

$

287,115

 

14.4

%

12.5

%

Rates

$

172,832

 

$

148,167

 

16.6

%

14.6

%

Credit

$

90,062

 

$

78,101

 

15.3

%

13.8

%

Equities

$

20,890

 

$

21,277

 

(1.8)

%

(4.8)

%

Money Markets

$

15,763

 

$

12,969

 

21.5

%

20.0

%

Market Data

$

22,956

 

$

21,222

 

8.2

%

6.9

%

Other

$

5,854

 

$

5,379

 

8.8

%

8.8

%

Net income

$

111,630

 

$

81,566

 

36.9

%

 

 

Net income attributable to Tradeweb Markets Inc. (2)

$

98,614

$

69,083

42.7

%

Diluted EPS

$

0.46

 

$

0.33

 

39.4

%

 

 

Net income margin

 

34.0

%

 

28.4

%

+559

bps

 

 

Non-GAAP Financial Measures

Adjusted EBITDA (1)

$

170,360

 

$

146,334

 

16.4

%

16.5

%

Adjusted EBITDA margin (1)

 

51.9

%

 

51.0

%

+92

bps

+181

bps

Adjusted EBIT (1)

$

155,772

 

$

133,114

 

17.0

%

17.2

%

Adjusted EBIT margin (1)

 

47.4

%

 

46.4

%

+108

bps

+192

bps

Adjusted Net Income (1)

$

130,794

 

$

106,491

 

22.8

%

23.0

%

Adjusted Diluted EPS (1)

$

0.55

 

$

0.45

 

22.2

%

22.2

%

 

(1)

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted Net Income, Adjusted Diluted EPS and constant currency change are non-GAAP financial measures. See "Non-GAAP Financial Measures" below and the attached schedules for additional information and reconciliations of such non-GAAP financial measures.

(2)

Represents net income less net income attributable to non-controlling interests.

 

ADV (US $bn)

(Unaudited)

 

 

 

 

Asset Class

Product

 

3Q23

 

3Q22

YoY

Rates

Cash

$

361

$

324

11.5

%

 

Derivatives

 

492

 

329

49.7

%

 

Total

 

853

 

653

30.7

%

Credit

Cash

 

13

 

9

39.6

%

 

Derivatives

 

17

 

20

(15.3)

%

 

Total

 

30

 

29

2.1

%

Equities

Cash

 

9

 

9

7.7

%

 

Derivatives

 

9

 

7

34.8

%

 

Total

 

19

 

16

19.7

%

Money Markets

Cash

 

522

 

401

30.3

%

 

Total

 

522

 

401

30.3

%

 

Total

$

1,424

$

1,099

29.6

%

DISCUSSION OF RESULTS

Rates – Revenues of $172.8 million in the third quarter of 2023 increased 16.6% compared to prior year period (14.6% increase on a constant currency basis). Rates ADV was up 30.7% from prior year period, as heightened interest rate volatility drove record volume in swaps/swaptions ≥ 1-year. U.S. and European government bonds reported double-digit ADV increases from prior year period, supported by sustained rates market volatility, while Mortgages ADV was up 7.3% reflecting increased trading activity across institutional, wholesale, and retail client sectors.

Credit – Revenues of $90.1 million in the third quarter of 2023 increased 15.3% compared to prior year period (13.8% increase on a constant currency basis). Credit ADV was up 2.1% from prior year period, as strong U.S. credit volumes reflected continued client adoption across Tradeweb protocols, including request-for-quote (RFQ), Tradeweb AllTrade® and portfolio trading. European Credit ADV was up 34.4% from prior year period, while our share of fully electronic TRACE for U.S. High Grade was a record 16.6%, up 263 bps from prior year period, and U.S. High Yield was a record 7.8%, up 240 bps from prior year period.

Equities – Revenues of $20.9 million in the third quarter of 2023 decreased 1.8% compared to prior year period (4.8% decrease on a constant currency basis). Equities ADV was up 19.7% from prior year period, driven by strong U.S. ETF wholesale activity, while institutional client engagement remained robust. European ETF volumes reflected declining overall market volumes.

Money Markets – Revenues of $15.8 million in the third quarter of 2023 increased 21.5% compared to prior year period (20.0% increase on a constant currency basis). Money Markets ADV was up 30.3% from prior year period, led by record activity in global repurchase agreements and continued client adoption of Tradeweb's electronic trading solutions.

Market Data – Revenues of $23.0 million in the third quarter of 2023 increased 8.2% compared to prior year period (6.9% increase on a constant currency basis). The increase was derived primarily from increased proprietary third party market data and trade reporting services (APA) revenue.

Other – Revenues of $5.9 million in the third quarter of 2023 increased 8.8% compared to prior year period (the same percentage increase on a constant currency basis). The increase was derived primarily from increased software development and implementation revenue on behalf of certain clients.

Operating Expenses of $203.6 million in the third quarter of 2023 increased 10.5% compared to $184.3 million in prior year period due to: higher expenses related to employee compensation and benefits associated with higher headcount and incentive compensation and commission tied to our operating performance, higher technology and communications expenses related to continued investment in our data strategy and infrastructure, higher professional fee expenses due to increased legal and other costs related to acquisitions and higher depreciation and amortization expenses, driven by increases in investment in our infrastructure and expenses relating to the assets acquired in connection with the Yieldbroker acquisition.

Adjusted Expenses of $172.6 million increased 12.1% (8.5% increase on a constant currency basis) compared to prior year period due to higher expenses related to employee compensation and benefits, higher technology and communications expenses and higher depreciation and amortization. Please see "Non-GAAP Financial Measures" below for additional information.

RECENT HIGHLIGHTS

October 2023

  • Announced new licensing agreement with LSEG Data & Analytics (Refinitiv), allowing LSEG to distribute our market data while providing Tradeweb with increased revenue and flexibility.
  • Announced strategic partnership with FTSE Russell to develop the next generation of fixed income pricing and index trading products. The collaboration is focused on expanding benchmark pricing, broadening index inclusion and enhancing trading functionality across fixed income products.

Third Quarter 2023

  • Closed acquisition of Yieldbroker, a leading Australian trading platform for Australian and New Zealand government bonds and interest rate derivatives covering the institutional, wholesale and primary markets.
  • Collaborated with FXall, LSEG's leading electronic platform for global currency products, to launch Tradeweb's FX Swap Workflow multi-asset digital solution, which links trading workflows in local currency EM bonds and FX swaps through a single user interface.
  • Published our third annual 2022 Corporate Sustainability Report and our inaugural Task Force on Climate-Related Financial Disclosure (TCFD) Report.
  • Announced that institutional clients executing Japanese Yen swaps on Tradeweb's Multilateral Trading Facilities (MTFs) and SEFs can clear their transactions via the Japan Securities Clearing Corporation (JSCC).
  • Recognized in numerous awards celebrating our company, as well as our outstanding and diverse talent, including: European Women in Finance, Excellence in Trading Platforms - Mélanie Hazan (Markets Media), European Women in Finance, Individual Achievement - Elodie Cany (Markets Media), 40 Innovators in Financial Markets - Billy Hult (TabbFORUM), Asia Risk Awards, OTC Platform of the Year (Risk.net), Asia Risk Awards, Buy-Side Trading System of the Year (Risk.net), Covered Bond Awards, Best Electronic Trading Platform (GlobalCapital), HFM Asia Services Awards, Most Disruptive Technology Solution (With Intelligence), Best Financial Services Companies to Work for (U.S. News & World Report), Best Workplaces for Innovators (Fast Company).

CAPITAL MANAGEMENT

  • $1.5 billion in cash and cash equivalents and an undrawn $500 million credit facility at September 30, 2023
  • Free cash flow for the trailing twelve months ended September 30, 2023 of $645.1 million, up 16.2% compared to prior year period. See “Non-GAAP Financial Measures” for additional information
  • Non-acquisition cash capital expenditures and capitalization of software development in the third quarter 2023 of $17.9 million
  • Invested $69.6 million in the acquisition of Yieldbroker, net of cash acquired
  • During the third quarter of 2023, as part of its share repurchase program, Tradeweb purchased 65,054 shares of Class A common stock, at an average price of $75.28, for purchases totaling $4.9 million. As of September 30, 2023, a total of $239.8 million remained available for repurchase pursuant to the share repurchase program authorization
  • $7.8 million in shares of Class A common stock were withheld in the third quarter of 2023 to satisfy tax obligations related to the exercise of stock options and vesting of restricted stock units and performance-based restricted stock units held by employees
  • The Board declared a quarterly cash dividend of $0.09 per share of Class A common stock and Class B common stock. The dividend will be payable on December 15, 2023 to stockholders of record as of December 1, 2023

OTHER MATTERS

Updated Full-Year 2023 Guidance*

  • Adjusted Expenses: $670 - 695 million
  • Acquisition and Refinitiv Transaction related depreciation and amortization expense: $128 million
  • Assumed non-GAAP tax rate: ~24% - 25%
  • Cash costs of non-acquisition capital expenditures and capitalized software development: $56 - 63 million

Full-Year 2024 & 2025 Revenue Guidance Related to the Refinitiv Market Data Contract

  • 2024 Revenues: ~ $80 million
  • 2025 Revenues: ~ $90 million

*GAAP operating expenses and tax rate guidance are not provided due to the inherent difficulty in quantifying certain amounts due to a variety of factors including the unpredictability in the movement of foreign currency rates. Expense guidance assumes an average 2022 Sterling/US$ foreign exchange rate or 1.24.

CONFERENCE CALL

Tradeweb Markets will hold a conference call to discuss third quarter 2023 results starting at 9:30 AM EDT today, October 26, 2023. A live, audio webcast of the conference call along with related presentation materials will be available at https://investors.tradeweb.com/events-and-presentations.

An archived recording of the call will be available afterward at https://investors.tradeweb.com.

ABOUT TRADEWEB MARKETS

Tradeweb Markets Inc. (Nasdaq: TW) is a leading, global operator of electronic marketplaces for rates, credit, equities and money markets. Founded in 1996, Tradeweb provides access to markets, data and analytics, electronic trading, straight-through-processing and reporting for more than 40 products to clients in the institutional, wholesale and retail markets. Advanced technologies developed by Tradeweb enhance price discovery, order execution and trade workflows while allowing for greater scale and helping to reduce risks in client trading operations. Tradeweb serves more than 2,500 clients in more than 65 countries. On average, Tradeweb facilitated more than $1.2 trillion in notional value traded per day over the past four fiscal quarters. For more information, please go to www.tradeweb.com.

TRADEWEB MARKETS INC.

 

Three Months Ended

 

Nine Months Ended

CONSOLIDATED STATEMENTS OF INCOME

 

September 30,

 

September 30,

Dollars in Thousands, Except Per Share Data

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Transaction fees and commissions

 

$

263,485

 

 

$

228,015

 

 

$

776,544

 

 

$

717,489

 

Subscription fees

 

 

46,361

 

 

 

41,342

 

 

 

136,483

 

 

 

124,337

 

Refinitiv market data fees

 

 

15,460

 

 

 

15,370

 

 

 

46,515

 

 

 

46,354

 

Other

 

 

3,051

 

 

 

2,388

 

 

 

8,677

 

 

 

7,559

 

Total revenue

 

 

328,357

 

 

 

287,115

 

 

 

968,219

 

 

 

895,739

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

116,016

 

 

 

102,720

 

 

 

334,433

 

 

 

330,601

 

Depreciation and amortization

 

 

46,559

 

 

 

44,778

 

 

 

137,850

 

 

 

133,998

 

Technology and communications

 

 

19,733

 

 

 

16,816

 

 

 

56,001

 

 

 

48,626

 

General and administrative

 

 

6,700

 

 

 

6,892

 

 

 

31,692

 

 

 

24,806

 

Professional fees

 

 

10,479

 

 

 

9,400

 

 

 

32,321

 

 

 

25,832

 

Occupancy

 

 

4,132

 

 

 

3,699

 

 

 

12,283

 

 

 

10,857

 

Total expenses

 

 

203,619

 

 

 

184,305

 

 

 

604,580

 

 

 

574,720

 

Operating income

 

 

124,738

 

 

��

102,810

 

 

 

363,639

 

 

 

321,019

 

Net interest income (expense)

 

 

17,465

 

 

 

3,413

 

 

 

45,065

 

 

 

3,507

 

Other income (loss), net

 

 

(1,907

)

 

 

 

 

 

(2,022

)

 

 

 

Income before taxes

 

 

140,296

 

 

 

106,223

 

 

 

406,682

 

 

 

324,526

 

Provision for income taxes

 

 

(28,666

)

 

 

(24,657

)

 

 

(90,920

)

 

 

(63,915

)

Net income

 

 

111,630

 

 

 

81,566

 

 

 

315,762

 

 

 

260,611

 

Less: Net income attributable to non-controlling interests

 

 

13,016

 

 

 

12,483

 

 

 

40,210

 

 

 

40,219

 

Net income attributable to Tradeweb Markets Inc.

 

$

98,614

 

 

$

69,083

 

 

$

275,552

 

 

$

220,392

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Tradeweb Markets Inc. Class A and B common stockholders:

 

 

 

 

 

 

 

 

Basic

 

$

0.47

 

 

$

0.34

 

 

$

1.31

 

 

$

1.08

 

Diluted

 

$

0.46

 

 

$

0.33

 

 

$

1.30

 

 

$

1.06

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

211,618,475

 

 

 

205,721,162

 

 

 

210,444,082

 

 

 

204,767,261

 

Diluted

 

 

213,491,634

 

 

 

208,329,469

 

 

 

212,276,908

 

 

 

207,748,037

 

 

TRADEWEB MARKETS INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Dollars in Thousands, Except per Share Data

 

 

Three Months Ended

 

Nine Months Ended

Reconciliation of Net Income to Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EBIT and Adjusted EBIT Margin

 

September 30,

 

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

(dollars in thousands)

Net income

 

$

111,630

 

 

$

81,566

 

 

$

315,762

 

 

$

260,611

 

Merger and acquisition transaction and integration costs (1)

 

 

4,614

 

 

 

43

 

 

 

6,411

 

 

 

40

 

Net interest (income) expense

 

 

(17,465

)

 

 

(3,413

)

 

 

(45,065

)

 

 

(3,507

)

Depreciation and amortization

 

 

46,559

 

 

 

44,778

 

 

 

137,850

 

 

 

133,998

 

Stock-based compensation expense (2)

 

 

525

 

 

 

2,675

 

 

 

1,960

 

 

 

13,839

 

Provision for income taxes

 

 

28,666

 

 

 

24,657

 

 

 

90,920

 

 

 

63,915

 

Foreign exchange (gains) / losses (3)

 

 

(6,076

)

 

 

(3,972

)

 

 

(4,242

)

 

 

(6,306

)

Tax receivable agreement liability adjustment (4)

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) loss, net

 

 

1,907

 

 

 

 

 

 

2,022

 

 

 

 

Adjusted EBITDA

 

$

170,360

 

 

$

146,334

 

 

$

505,618

 

 

$

462,590

 

Less: Depreciation and amortization

 

 

(46,559

)

 

 

(44,778

)

 

 

(137,850

)

 

 

(133,998

)

Add: D&A related to acquisitions and the Refinitiv Transaction (5)

 

 

31,971

 

 

 

31,558

 

 

 

95,217

 

 

 

95,088

 

Adjusted EBIT

 

$

155,772

 

 

$

133,114

 

 

$

462,985

 

 

$

423,680

 

Net income margin (6)

 

 

34.0

%

 

 

28.4

%

 

 

32.6

%

 

 

29.1

%

Adjusted EBITDA margin (6)

 

 

51.9

%

 

 

51.0

%

 

 

52.2

%

 

 

51.6

%

Adjusted EBIT margin (6)

 

 

47.4

%

 

 

46.4

%

 

 

47.8

%

 

 

47.3

%

(1)

Represents incremental direct costs associated with the acquisition and integration of completed and potential mergers and acquisitions. These costs generally include legal, consulting, advisory, due diligence, severance and other third party costs incurred that directly relate to the acquisition transaction or its integration.

(2)

Represents non-cash stock-based compensation expense associated with the Special Option Award and post-IPO options awarded in 2019 and payroll taxes associated with the exercise of such options. During the three and nine months ended September 30, 2022, this adjustment also includes $2.0 million and $9.4 million, respectively, of non-cash accelerated stock-based compensation expense and related payroll taxes associated with our former CFO and former CEO.

(3)

Represents unrealized gain or loss recognized on foreign currency forward contracts and foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

(4)

Represents income recognized during the applicable period due to changes in the tax receivable agreement liability recorded in the consolidated statement of financial condition as a result of changes in the mix of earnings, tax legislation and tax rates in various jurisdictions which impacted our tax savings.

(5)

Represents intangible asset and acquired software amortization resulting from acquisitions and intangible asset amortization and increased tangible asset and capitalized software depreciation and amortization resulting from the application of pushdown accounting to the Refinitiv Transaction (where all assets were marked to fair value as of the closing date of the Refinitiv Transaction).

(6)

Net income margin, Adjusted EBITDA margin and Adjusted EBIT margin are defined as net income, Adjusted EBITDA and Adjusted EBIT, respectively, divided by revenue for the applicable period.

 

 

Three Months Ended

 

Nine Months Ended

Reconciliation of Net Income to Adjusted Net Income and Adjusted Diluted EPS

 

September 30,

 

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

(in thousands, except per share amounts)

Earnings per diluted share

 

$

0.46

 

 

$

0.33

 

 

$

1.30

 

 

$

1.06

 

Net income attributable to Tradeweb Markets Inc.

 

$

98,614

 

 

$

69,083

 

 

$

275,552

 

 

$

220,392

 

Net income attributable to non-controlling interests (1)

 

 

13,016

 

 

 

12,483

 

 

 

40,210

 

 

 

40,219

 

Net income

 

 

111,630

 

 

 

81,566

 

 

 

315,762

 

 

 

260,611

 

Provision for income taxes

 

 

28,666

 

 

 

24,657

 

 

 

90,920

 

 

 

63,915

 

Merger and acquisition transaction and integration costs (2)

 

 

4,614

 

 

 

43

 

 

 

6,411

 

 

 

40

 

D&A related to acquisitions and the Refinitiv Transaction (3)

 

 

31,971

 

 

 

31,558

 

 

 

95,217

 

 

 

95,088

 

Stock-based compensation expense (4)

 

 

525

 

 

 

2,675

 

 

 

1,960

 

 

 

13,839

 

Foreign exchange (gains) / losses (5)

 

 

(6,076

)

 

 

(3,972

)

 

 

(4,242

)

 

 

(6,306

)

Tax receivable agreement liability adjustment (6)

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) loss, net

 

 

1,907

 

 

 

 

 

 

2,022

 

 

 

 

Adjusted Net Income before income taxes

 

 

173,237

 

 

 

136,527

 

 

 

508,050

 

 

 

427,187

 

Adjusted income taxes (7)

 

 

(42,443

)

 

 

(30,036

)

 

 

(124,472

)

 

 

(93,982

)

Adjusted Net Income

 

$

130,794

 

 

$

106,491

 

 

$

383,578

 

 

$

333,205

 

Adjusted Diluted EPS (8)

 

$

0.55

 

 

$

0.45

 

 

$

1.62

 

 

$

1.40

 

(1)

Represents the reallocation of net income attributable to non-controlling interests from the assumed exchange of all outstanding LLC Interests held by non-controlling interests for shares of Class A or Class B common stock.

(2)

Represents incremental direct costs associated with the acquisition and integration of completed and potential mergers and acquisitions. These costs generally include legal, consulting, advisory, due diligence, severance and other third party costs incurred that directly relate to the acquisition transaction or its integration.

(3)

Represents intangible asset and acquired software amortization resulting from acquisitions and intangible asset amortization and increased tangible asset and capitalized software depreciation and amortization resulting from the application of pushdown accounting to the Refinitiv Transaction (where all assets were marked to fair value as of the closing date of the Refinitiv Transaction).

(4)

Represents non-cash stock-based compensation expense associated with the Special Option Award and post-IPO options awarded in 2019 and payroll taxes associated with the exercise of such options. During the three and nine months ended September 30, 2022, this adjustment also includes $2.0 million and $9.4 million, respectively, of non-cash accelerated stock-based compensation expense and related payroll taxes associated with our former CFO and former CEO.

(5)

Represents unrealized gain or loss recognized on foreign currency forward contracts and foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

(6)

Represents income recognized during the applicable period due to changes in the tax receivable agreement liability recorded in the consolidated statement of financial condition as a result of changes in the mix of earnings, tax legislation and tax rates in various jurisdictions which impacted our tax savings.

(7)

Represents corporate income taxes at an assumed effective tax rate of 24.5% applied to Adjusted Net Income before income taxes for the three and nine months ended September 30, 2023 and 22.0% for the three and nine months ended September 30, 2022.

(8)

For a summary of the calculation of Adjusted Diluted EPS, see “Reconciliation of Diluted Weighted Average Shares Outstanding to Adjusted Diluted Weighted Average Shares Outstanding and Adjusted Diluted EPS” below.

The following table summarizes the calculation of Adjusted Diluted EPS for the periods presented:

Reconciliation of Diluted Weighted Average Shares Outstanding to Adjusted Diluted

Weighted Average Shares Outstanding and Adjusted Diluted EPS

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Diluted weighted average shares of Class A and Class B common stock outstanding

 

 

213,491,634

 

 

208,329,469

 

 

212,276,908

 

 

207,748,037

Weighted average of other participating securities (1)

 

 

265,681

 

 

246,238

 

 

266,453

 

 

121,115

Assumed exchange of LLC Interests for shares of Class A or Class B common stock (2)

 

 

23,080,571

 

 

28,750,603

 

 

24,179,583

 

 

29,667,383

Adjusted diluted weighted average shares outstanding

 

 

236,837,886

 

 

237,326,310

 

 

236,722,944

 

 

237,536,535

Adjusted Net Income (in thousands)

 

$

130,794

 

$

106,491

 

$

383,578

 

$

333,205

Adjusted Diluted EPS

 

$

0.55

 

$

0.45

 

$

1.62

 

$

1.40

(1)

Represents weighted average unvested restricted stock units and unsettled vested performance-based restricted stock units issued to certain retired or terminated employees that are entitled to non-forfeitable dividend equivalent rights and are considered participating securities prior to being issued and outstanding shares of common stock in accordance with the two-class method used for purposes of calculating earnings per share.

(2)

Assumes the full exchange of the weighted average of all outstanding LLC Interests held by non-controlling interests for shares of Class A or Class B common stock, resulting in the elimination of the non-controlling interests and recognition of the net income attributable to non-controlling interests.

 

 

Three Months Ended

 

Nine Months Ended

Reconciliation of Operating Expenses to Adjusted Expenses

 

September 30,

 

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

(in thousands)

Operating Expenses

 

$

203,619

 

 

$

184,305

 

 

$

604,580

 

 

$

574,720

 

Merger and acquisition transaction and integration costs (1)

 

 

(4,614

)

 

 

(43

)

 

 

(6,411

)

 

 

(40

)

D&A related to acquisitions and the Refinitiv Transaction (2)

 

 

(31,971

)

 

 

(31,558

)

 

 

(95,217

)

 

 

(95,088

)

Stock-based compensation expense (3)

 

 

(525

)

 

 

(2,675

)

 

 

(1,960

)

 

 

(13,839

)

Foreign exchange gains / (losses) (4)

 

 

6,076

 

 

 

3,972

 

 

 

4,242

 

 

 

6,306

 

Adjusted Expenses

 

$

172,585

 

 

$

154,001

 

 

$

505,234

 

 

$

472,059

 

(1)

Represents incremental direct costs associated with the acquisition and integration of completed and potential mergers and acquisitions. These costs generally include legal, consulting, advisory, due diligence, severance and other third party costs incurred that directly relate to the acquisition transaction or its integration.

(2)

Represents intangible asset and acquired software amortization resulting from acquisitions and intangible asset amortization and increased tangible asset and capitalized software depreciation and amortization resulting from the application of pushdown accounting to the Refinitiv Transaction (where all assets were marked to fair value as of the closing date of the Refinitiv Transaction).

(3)

Represents non-cash stock-based compensation expense associated with the Special Option Award and post-IPO options awarded in 2019 and payroll taxes associated with the exercise of such options. During the three and nine months ended September 30, 2022, this adjustment also includes $2.0 million and $9.4 million, respectively, of non-cash accelerated stock-based compensation expense and related payroll taxes associated with our former CFO and former CEO.

(4)

Represents unrealized gain or loss recognized on foreign currency forward contracts and foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

 

 

Trailing Twelve Months Ended September 30,

Reconciliation of Cash Flow from Operating Activities to Free Cash Flow

 

 

2023

 

 

 

2022

 

 

 

(in thousands)

Cash flow from operating activities

 

$

709,328

 

 

$

616,473

 

Less: Capitalization of software development costs

 

 

(41,517

)

 

 

(36,127

)

Less: Purchases of furniture, equipment and leasehold improvements

 

 

(22,722

)

 

 

(25,123

)

Free Cash Flow

 

$

645,089

 

 

$

555,223

 

TRADEWEB MARKETS INC.

BASIC AND DILUTED EPS CALCULATIONS (UNAUDITED)

Dollars in Thousands, Except per Share Data

 

The following table summarizes the basic and diluted earnings per share calculations for Tradeweb Markets Inc.:

 

 

 

Three Months Ended

 

Nine Months Ended

EPS: Net income attributable to Tradeweb Markets Inc.

 

September 30,

 

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

(in thousands, except share and per share amounts)

Numerator:

 

 

 

 

 

 

 

 

Net income attributable to Tradeweb Markets Inc.

 

$

98,614

 

 

$

69,083

 

 

$

275,552

 

 

$

220,392

 

Less: Distributed and undistributed earnings allocated to unvested RSUs and unsettled vested PRSUs (1)

 

 

(124

)

 

 

(82

)

 

 

(348

)

 

 

(111

)

Net income attributable to outstanding shares of Class A and Class B common stock - Basic and Diluted

 

$

98,490

 

 

$

69,001

 

 

$

275,204

 

 

$

220,281

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average shares of Class A and Class B common stock outstanding - Basic

 

 

211,618,475

 

 

 

205,721,162

 

 

 

210,444,082

 

 

 

204,767,261

 

Dilutive effect of PRSUs

 

 

504,945

 

 

 

746,043

 

 

 

380,740

 

 

 

796,090

 

Dilutive effect of options

 

 

1,110,175

 

 

 

1,661,705

 

 

 

1,240,923

 

 

 

1,940,970

 

Dilutive effect of RSUs

 

 

258,039

 

 

 

200,559

 

 

 

211,163

 

 

 

243,716

 

Dilutive effect of PSUs

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of Class A and Class B common stock outstanding - Diluted

 

 

213,491,634

 

 

 

208,329,469

 

 

 

212,276,908

 

 

 

207,748,037

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic

 

$

0.47

 

 

$

0.34

 

 

$

1.31

 

 

$

1.08

 

Earnings per share - Diluted

 

$

0.46

 

 

$

0.33

 

 

$

1.30

 

 

$

1.06

 

(1)

During the three months ended September 30, 2023 and 2022, there was a total of 265,681 and 246,238, respectively, and during the nine months ended September 30, 2023 and 2022, there was a total of 266,453 and 121,115, respectively, weighted average unvested RSUs and unsettled vested PRSUs that were considered a participating security for purposes of calculating earnings per share in accordance with the two-class method.

TRADEWEB MARKETS INC.

REVENUES BY ASSET CLASS (UNAUDITED)

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

2023

 

2022

 

$ Change

 

% Change

Revenues

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 

 

(dollars in thousands)

Rates

 

$

114,128

 

$

58,704

 

$

93,673

 

$

54,494

 

$

20,455

 

 

$

4,210

 

 

21.8

%

 

7.7

%

Credit

 

 

82,484

 

 

7,578

 

 

71,724

 

 

6,377

 

 

10,760

 

 

 

1,201

 

 

15.0

%

 

18.8

%

Equities

 

 

18,567

 

 

2,323

 

 

18,969

 

 

2,308

 

 

(402

)

 

 

15

 

 

(2.1

)%

 

0.6

%

Money Markets

 

 

11,433

 

 

4,330

 

 

8,507

 

 

4,462

 

 

2,926

 

 

 

(132

)

 

34.4

%

 

(3.0

)%

Market Data

 

 

115

 

 

22,841

 

 

 

 

21,222

 

 

115

 

 

 

1,619

 

 

N/M

 

 

7.6

%

Other

 

 

 

 

5,854

 

 

 

 

5,379

 

 

 

 

 

475

 

 

 

 

8.8

%

Total revenue

 

$

226,727

 

$

101,630

 

$

192,873

 

$

94,242

 

$

33,854

 

 

$

7,388

 

 

17.6

%

 

7.8

%

 

N/M = not meaningful

 

 

Three Months Ended

 

 

TRADEWEB MARKETS INC.

 

September 30,

 

YoY

AVERAGE VARIABLE FEES PER MILLION DOLLARS OF VOLUME (UNAUDITED)

 

 

2023

 

 

2022

 

% Change

Rates

 

$

2.10

 

$

2.23

 

(5.7

)%

Rates Cash

 

$

2.42

 

$

2.23

 

8.5

%

Rates Derivatives

 

$

1.87

 

$

2.24

 

(16.4

)%

Rates Derivatives (greater than 1 year)

 

$

2.72

 

$

3.46

 

(21.4

)%

Other Rates Derivatives (1)

 

$

0.22

 

$

0.27

 

(19.1

)%

 

 

 

 

 

 

 

Credit

 

$

43.26

 

$

38.03

 

13.7

%

Cash Credit (2)

 

$

162.20

 

$

168.74

 

(3.9

)%

Credit Derivatives, China Bonds and U.S. Cash “EP”

 

$

5.75

 

$

7.12

 

(19.3

)%

 

 

 

 

 

 

 

Equities

��

$

15.50

 

$

18.69

 

(17.1

)%

Equities Cash

 

$

25.42

 

$

29.33

 

(13.3

)%

Equities Derivatives

 

$

5.50

 

$

5.28

 

4.1

%

 

 

 

 

 

 

 

Money Markets

 

$

0.35

 

$

0.33

 

4.8

%

 

 

 

 

 

 

 

Total

 

$

2.51

 

$

2.73

 

(8.2

)%

Total excluding Other Rates Derivatives (3)

 

$

2.81

 

$

3.05

 

(7.9

)%

(1)

Includes Swaps/Swaptions of tenor less than 1 year and Rates Futures.

(2)

The “Cash Credit” category represents the “Credit” asset class excluding (1) Credit Derivatives (2) China Bonds and (3) U.S. High Grade and High Yield electronically processed (“EP”) activity.

(3)

Included to contextualize the impact of short-tenored Swaps/Swaptions and Rates Futures on totals for all periods presented.

TRADEWEB MARKETS INC.

AVERAGE DAILY VOLUME (UNAUDITED)(1)

 

 

 

2023 Q3

 

2022 Q3

 

YoY

Asset Class

Product

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

ADV

Rates

Cash

 

$

361,432

$

22,842,103

 

$

324,168

$

20,774,062

 

11.50

%

 

U.S. Government Bonds

 

 

142,641

 

8,986,371

 

 

123,736

 

7,919,082

 

15.28

%

 

European Government Bonds

 

 

37,251

 

2,421,306

 

 

33,347

 

2,167,535

 

11.71

%

 

Mortgages

 

 

174,436

 

10,989,473

 

 

162,542

 

10,402,677

 

7.32

%

 

Other Government Bonds

 

 

7,104

 

444,954

 

 

4,544

 

284,767

 

56.36

%

 

Derivatives

 

 

491,883

 

31,422,422

 

 

328,636

 

21,158,388

 

49.67

%

 

Swaps/Swaptions ≥ 1Y

 

 

326,175

 

20,799,345

 

 

203,038

 

13,066,309

 

60.65

%

 

Swaps/Swaptions < 1Y

 

 

163,393

 

10,476,689

 

 

123,817

 

7,978,143

 

31.96

%

 

Futures

 

 

2,316

 

146,388

 

 

1,780

 

113,936

 

30.10

%

 

Total

 

 

853,316

 

54,264,525

 

 

652,804

 

41,932,450

 

30.72

%

Credit

Cash

 

 

12,981

 

824,984

 

 

9,300

 

597,520

 

39.58

%

 

U.S. High Grade - Fully Electronic

 

 

4,225

 

266,163

 

 

3,293

 

210,757

 

28.29

%

U.S. High Grade - Electronically Processed

 

 

2,339

 

147,359

 

 

2,475

 

158,411

 

(5.50

)%

 

U.S. High Yield - Fully Electronic

 

 

610

 

38,455

 

 

463

 

29,622

 

31.88

%

 

U.S. High Yield - Electronically Processed

 

 

217

 

13,668

 

 

351

 

22,482

 

(38.24

)%

 

European Credit

 

 

1,869

 

121,475

 

 

1,390

 

90,371

 

34.42

%

 

Municipal Bonds

 

 

334

 

21,054

 

 

354

 

22,673

 

(5.67

)%

 

Chinese Bonds

 

 

3,231

 

206,794

 

 

863

 

56,068

 

274.59

%

 

Other Credit Bonds

 

 

155

 

10,017

 

 

110

 

7,135

 

40.98

%

 

Derivatives

 

 

16,955

 

1,081,813

 

 

20,020

 

1,289,959

 

(15.31

)%

 

Swaps

 

 

16,955

 

1,081,813

 

 

20,020

 

1,289,959

 

(15.31

)%

 

Total

 

 

29,936

 

1,906,796

 

 

29,320

 

1,887,479

 

2.10

%

Equities

Cash

 

 

9,479

 

601,332

 

 

8,804

 

565,934

 

7.67

%

 

U.S. ETFs

 

 

7,402

 

466,323

 

 

6,299

 

403,162

 

17.50

%

 

European ETFs

 

 

2,077

 

135,009

 

 

2,504

 

162,772

 

(17.06

)%

 

Derivatives

 

 

9,451

 

596,615

 

 

7,009

 

449,209

 

34.83

%

 

Convertibles/Swaps/Options

 

 

6,285

 

396,969

 

 

4,384

 

281,007

 

43.35

%

 

Futures

 

 

3,166

 

199,646

 

 

2,625

 

168,202

 

20.60

%

 

Total

 

 

18,930

 

1,197,947

 

 

15,813

 

1,015,143

 

19.71

%

Money Markets

Cash

 

 

522,075

 

33,065,896

 

 

400,726

 

25,721,492

 

30.28

%

 

Repurchase Agreements (Repo)

 

 

505,191

 

32,000,195

 

 

382,040

 

24,525,135

 

32.24

%

 

Other Money Markets

 

 

16,884

 

1,065,702

 

 

18,686

 

1,196,357

 

(9.64

)%

 

Total

 

 

522,075

 

33,065,896

 

 

400,726

 

25,721,492

 

30.28

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

YoY

 

Total

 

 

1,424,256

 

90,435,165

 

 

1,098,663

 

70,556,565

 

29.60

%

(1)

Total volume across Rates (Cash and Derivatives), Credit and Money Markets include Australia and New Zealand estimated volumes from the Yieldbroker business that Tradeweb acquired on August 31, 2023.

To access historical traded volumes, go to https://www.tradeweb.com/newsroom/monthly-activity-reports/

BASIS OF PRESENTATION

Tradeweb Markets Inc. (unless the context otherwise requires, together with its subsidiaries, referred to as “we,” “our,” “Tradeweb,” “Tradeweb Markets” or the “Company”) closed its IPO on April 8, 2019. As a result of certain reorganization transactions (the “Reorganization Transactions”) completed in connection with the IPO, on April 4, 2019, Tradeweb Markets Inc. became a holding company whose only material assets consist of its equity interest in Tradeweb Markets LLC (“TWM LLC”) and related deferred tax assets. As the sole manager of TWM LLC, Tradeweb Markets Inc. operates and controls all of the business and affairs of TWM LLC and, through TWM LLC and its subsidiaries, conducts its business. As a result of this control, and because Tradeweb Markets Inc. has a substantial financial interest in TWM LLC, Tradeweb Markets Inc. consolidates the financial results of TWM LLC and its subsidiaries.

Numerical figures included in this release have been subject to rounding adjustments and as a result totals may not be the arithmetic aggregation of the amounts that precede them and figures expressed as percentages may not total 100%.

Please refer to the Company's previously filed Quarterly Reports on Form 10-Q and Annual Report on Form 10-K for capitalized terms not otherwise defined herein.

UNAUDITED INTERIM RESULTS

The interim financial results presented herein for the three and nine months ended September 30, 2023 and 2022 are unaudited. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of the federal securities laws. Statements related to, among other things, our guidance, including full-year 2023 guidance, future performance, the industry and markets in which we operate, our expectations, beliefs, plans, strategies, objectives, prospects and assumptions and future events are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed under the heading “Risk Factors” in the documents of Tradeweb Markets Inc. on file with or furnished to the SEC, may cause our actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this release are not guarantees of future events or performance and future events, our actual results of operations, financial condition or liquidity, and the development of the industry and markets in which we operate, may differ materially from the forward-looking statements contained in this release. In addition, even if future events, our results of operations, financial condition, or liquidity, and events in the industry and markets in which we operate, are consistent with the forward-looking statements contained in this release, they may not be predictive of events, results or developments in future periods. Any forward-looking statement that we make in this release speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this release.

NON-GAAP FINANCIAL MEASURES

This release contains “non-GAAP financial measures,” including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted Net Income, Adjusted Net Income per diluted share ("Adjusted Diluted EPS"), Adjusted Expenses, Free Cash Flow and constant currency change, which are supplemental financial measures that are not calculated and presented in accordance with GAAP. We make use of non-GAAP financial measures in evaluating our past results and future prospects. We present these non-GAAP financial measures because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

Management and our board of directors use Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT and Adjusted EBIT margin to assess our financial performance and believe they are helpful in highlighting trends in our core operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Further, our executive incentive compensation is based in part on components of Adjusted EBITDA.

We use Adjusted Net Income and Adjusted Diluted EPS as supplemental metrics to evaluate our business performance in a way that also considers our ability to generate profit without the impact of certain items. Each of the normal recurring adjustments and other adjustments included in Adjusted Net Income and Adjusted Diluted EPS help to provide management with a measure of our operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.

We use Adjusted Expenses as a supplemental metric to evaluate our underlying operating performance over time by removing items that are not related to day-to-day operations or are non-cash expenses.

We use Free Cash Flow to assess our liquidity in a way that considers the amount of cash generated from our core operations after non-acquisition related expenditures for capitalized software development costs and furniture, equipment and leasehold improvements.

We present certain changes on a “constant currency” basis. Since our consolidated financial statements are presented in U.S. dollars, we must translate non-U.S. dollar revenues and expenses into U.S. dollars. Constant currency change, which is a non-GAAP financial measure, is defined as change excluding the effects of foreign currency fluctuations. Constant currency information is calculated by translating the current period and prior period’s results using the annual average exchange rates for the prior period. We use constant currency change as a supplemental metric to evaluate our underlying performance between periods by removing the impact of foreign currency fluctuations. We present certain constant currency change information because we believe it provides investors and analysts a useful comparison of our results and trends between periods. This information should be considered in addition to, not as a substitute for, results reported in accordance with GAAP.

See the attached schedules for reconciliations of the non-GAAP financial measures contained in this release to their most comparable GAAP financial measure. Non-GAAP financial measures have limitations as analytical tools, and you should not consider these non-GAAP financial measures in isolation or as alternatives to net income attributable to Tradeweb Markets Inc., net income, net income margin, earnings per share, operating income, operating expenses, cash flow from operating activities or any other financial measure prepared or derived in accordance with GAAP. You are encouraged to evaluate each adjustment included in the reconciliations. In addition, in evaluating Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted EBT, Adjusted Net Income, Adjusted Diluted EPS, Adjusted Expenses and Free Cash Flow, you should be aware that in the future, we may incur expenses similar to the adjustments in the presentation of these non-GAAP financial measures.

Our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, the non-GAAP financial measures contained in this release may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

MARKET AND INDUSTRY DATA

This release includes estimates regarding market and industry data that we prepared based on our management’s knowledge and experience in the markets in which we operate, together with information obtained from various sources, including publicly available information, industry reports and publications, surveys, our clients, trade and business organizations and other contacts in the markets in which we operate. In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets in which we operate. While such information is believed to be reliable for the purposes used herein, no representations are made as to the accuracy or completeness thereof and we take no responsibility for such information.

TRADEWEB SOCIAL MEDIA

Investors and others should note that Tradeweb announces material financial and operational information using its investor relations website, press releases, SEC filings and public conference calls and webcasts. Information about Tradeweb, its business and its results of operations may also be announced by posts on the Company’s accounts on the following social media channels: Instagram, LinkedIn and X (formerly Twitter). The information that we post through these social media channels may be deemed material. As a result, we encourage investors, the media, and others interested in Tradeweb to monitor these social media channels in addition to following our investor relations website, press releases, SEC filings and public conference calls and webcasts. These social media channels may be updated from time to time on our investor relations website.

Billy Hult, CEO of Tradeweb: Tradeweb delivered record third-quarter revenues, as heightened focus on fixed income and a sustained period of high interest rates dominated institutional, wholesale and retail client sectors.

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