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.
- To join the call via audio webcast, click here:
https://edge.media-server.com/mmc/p/g22t4gez/
- To join the call via phone, please register in advance here:
https://register.vevent.com/register/BIe3255f53031643bcabc94aed666618ed.
Registered participants will receive an email confirmation with a
unique PIN to access the conference call.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231023488515/en/
Investor Relations Ashley Serrao + 1 646 430 6027
Ashley.Serrao@Tradeweb.com
Media Relations Daniel Noonan + 1 646 767 4677
Daniel.Noonan@Tradeweb.com
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