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TRADEWEB REPORTS THIRD QUARTER 2022 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, 2022.

  • $287.1 million quarterly revenues increased 8.2% (13.1% on a constant currency basis) compared to prior year period
  • $1.1 trillion average daily volume (“ADV”) for the quarter, an increase of 14.0% compared to prior year period, with record ADV in fully electronic U.S. High Grade credit, equity convertibles/swaps/options and institutional municipal bonds. Tradeweb captured a record 13.9% of fully electronic U.S. High Grade TRACE
  • $81.6 million net income and $106.5 million adjusted net income for the quarter, increases of 24.9% and 13.1% respectively from prior year period
  • 51.0% adjusted EBITDA margin and $146.3 million adjusted EBITDA for the quarter, compared to 50.1% and $132.9 million respectively for prior year period
  • $0.33 diluted earnings per share (“Diluted EPS”) for the quarter and $0.45 adjusted diluted earnings per share
  • $0.08 per share quarterly cash dividend declared; $9.0 million of shares repurchased

Lee Olesky, Chairman and CEO, Tradeweb Markets:

"Tradeweb reported record third quarter revenues driven by strong trading volumes across asset classes and products. Despite challenging markets, we delivered double-digit revenue growth on a constant currency basis in rates, credit, equities and money markets. Our clients leveraged a wide range of electronic tools and protocols to help advance their trading strategies as markets reflected concerns around inflation and geopolitical conflict. Client engagement was strong across all of our markets and we’ve seen increased interest in electronifying markets that have been persistently analog, like swaps and repos.

As I prepare to retire as CEO at year-end and stay on as chairman, I am proud that Tradeweb has continued to grow, innovate and collaborate with our clients to make markets more efficient. Billy Hult and our leadership team are well positioned to drive our next wave of growth, and I can’t wait to see what comes next. I am grateful to our clients and employees for their confidence and support.”

 

SELECT FINANCIAL

RESULTS

 

 

 

 

 

Constant

 

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

       

Currency

 

GAAP Financial Measures

 3Q22

 

3Q21

Change

Growth (1)

 

Total revenue

$

287,115

$

265,325

8.2

%

13.1

%

 

Rates

$

148,167

$

139,418

6.3

%

11.8

%

 

Credit

$

78,101

$

72,243

8.1

%

11.7

%

 

Equities

$

21,277

$

16,457

29.3

%

38.6

%

 

Money Markets

$

12,969

$

11,221

15.6

%

19.7

%

 

Market Data

$

21,222

$

20,515

3.4

%

6.1

%

 

Other

$

5,379

$

5,471

(1.7)

%

(1.6)

%

 

Net income

$

81,566

$

65,305

24.9

%

 

 

Net income attributable to Tradeweb Markets Inc. (2)

$

69,083

$

54,763

26.1

%

 
 

Diluted EPS

$

0.33

$

0.26

26.9

%

 

 

 

Non-GAAP Financial Measures

         
 

Adjusted EBITDA (1)

$

146,334

$

132,946

10.1

%

16.0

%

 

Adjusted EBITDA margin (1)

 

51.0%

 

50.1%

+86

bps

+130

bps

 

Adjusted EBIT (1)

$

133,114

$

121,079

9.9

%

16.3

%

 

Adjusted EBIT margin (1)

 

46.4%

 

45.6%

+73

bps

+130

bps

 

Adjusted Net Income (1)

$

106,491

$

94,160

13.1

%

19.5

%

 

Adjusted Diluted EPS (1)

$

0.45

$

0.39

15.4

%

20.5

%

(1)

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted Net Income, Adjusted Diluted EPS and constant currency growth 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

 

3Q22

 

3Q21

YoY

 
 

Rates

Cash

$

324

$

337

(3.8) %

 
 

 

Derivatives

 

329

 

247

33.1 %

 
 

 

Total

 

653

 

584

11.8 %

 
 

Credit

Cash

 

9

 

8

9.9 %

 
 

 

Derivatives

 

20

 

14

45.1 %

 
 

 

Total

 

29

 

22

31.7 %

 
 

Equities

Cash

 

9

 

8

16.6 %

 
 

 

Derivatives

 

7

 

7

0.3 %

 
 

 

Total

 

16

 

15

8.7 %

 
 

Money Markets

Cash

 

401

 

344

16.7 %

 
 

 

Total

 

401

 

344

16.7 %

 
 

 

Total

$

1,099

$

964

14.0 %

 

DISCUSSION OF RESULTS

Rates – Revenues of $148.2 million in the third quarter of 2022 increased 6.3% compared to prior year period (11.8% on a constant currency basis). Rates ADV was up 11.8% driven by strong growth in swaps/swaptions ≥ 1-year and rates volatility in U.S. and European government bonds.

Credit – Revenues of $78.1 million in the third quarter of 2022 increased 8.1% compared to prior year period (11.7% on a constant currency basis). Credit ADV was up 31.7% with record ADV in fully electronic U.S. High Grade credit and institutional municipal bonds, as well as record share of fully electronic U.S. High Grade TRACE (13.9%). U.S. and European credit volumes reflected continued client adoption across Tradeweb protocols, including request-for-quote (RFQ), Tradeweb AllTrade and portfolio trading.

Equities – Revenues of $21.3 million in the third quarter of 2022 increased 29.3% compared to prior year period (38.6% on a constant currency basis). Equities ADV was up 8.7% with record ADV in equity convertibles/swaps/options. Equities performance reflected increased global institutional client activity driven by further adoption of RFQ and continued market volatility.

Money Markets – Revenues of $13.0 million in the third quarter of 2022 increased 15.6% compared to prior year period (19.7% on a constant currency basis). Money Markets ADV was up 16.7% led by strong client adoption of Tradeweb's electronic trading solutions and retail money markets activity, which increased over the third quarter and culminated with a monthly record in September.

Market Data – Revenues of $21.2 million in the third quarter of 2022 increased 3.4% compared to prior year period (6.1% on a constant currency basis). The increase was derived from increased third party market data fees and Refinitiv market data fees.

Other – Revenues of $5.4 million in the third quarter of 2022 decreased 1.7% compared to prior year period (1.6% decrease on a constant currency basis).

Operating Expenses of $184.3 million in the third quarter of 2022 increased 2.5% compared to $179.8 million in the prior year period due to: higher employee compensation and benefits associated with higher headcount to support growth, $2.0 million in CEO Retirement Accelerated Stock-Based Compensation Expense recognized during the third quarter of 2022 and higher technology and communications expenses primarily due to increased data and clearing fees driven primarily by higher trading volumes as well as increased investment in our data strategy and infrastructure; this was partially offset by lower general and administrative expenses, as foreign exchange gains more than offset the increased travel and entertainment expense following the easing of restrictions relating to the pandemic.

Adjusted Expenses of $154.0 million increased 6.8% (10.4% on a constant currency basis) compared to the prior year period due to: higher employee compensation and benefits associated with higher headcount to support growth; higher technology and communications expenses; higher general and administrative expenses; higher depreciation and amortization and higher professional fees. Please see "Non-GAAP Financial Measures" below for additional information.

RECENT HIGHLIGHTS

Third Quarter 2022

  • Announced the appointment of Thomas Pluta as President of Tradeweb beginning January 1, 2023
  • Appointed Jacques Aigrain and Rana Yared as Independent Directors to Tradeweb’s board
  • Announced collaboration with S&P Global Market Intelligence to connect primary and secondary markets in Europe
  • Published our second annual 2021 Corporate Sustainability Report
  • Facilitated the first fully automated dealer-to-client EUR interest rate swap versus Eurex bund future trade; non-deliverable interest rate swap transaction in Thai Baht (#THB) and interest rate swap transaction in Israeli Shekel (#ILS) on the Tradeweb platform
  • Recognized in numerous awards including: Best Workplaces for Innovators (Fast Company); European Markets Choice Awards, Markets Recognition Award (Markets Media); Excellence in Trading & Tech Awards, Best Fixed Income Trading Platform (Financial News); Excellence in Trading & Tech Awards, Trading Initiative of the Year (Financial News); Americas Derivatives Awards, Outstanding Achievement Award - Lee Olesky (GlobalCapital); Americas Derivatives Awards, Swap Execution Facility of the Year (GlobalCapital); Global Derivatives Awards, OTC Trading Venue of the Year (GlobalCapital); Asia Risk Awards, Buy-Side Trading System of the Year (Risk.net); Asia Capital Markets Awards, Fixed Income Trading System of the Year (FOW Global Investor Group); Asia Capital Markets Awards, Multi-Asset Trading System of the Year (FOW Global Investor Group)

CAPITAL MANAGEMENT

  • $1.1 billion in cash and cash equivalents and an undrawn $500 million credit facility at September 30, 2022
  • Non-acquisition related capital expenditures and capitalization of software development in third quarter 2022: $12.3 million
  • Free cash flow for the trailing twelve months ended September 30, 2022 of $555.2 million, up 16.3% compared to the prior year period. See “Non-GAAP Financial Measures” for additional information
  • During the third quarter of 2022, as part of its Share Repurchase Program, Tradeweb purchased 129,809 shares of Class A common stock, at an average price of $69.33, for purchases totaling $9.0 million. As of September 30, 2022, a total of $9.0 million remained available for repurchase pursuant to the Share Repurchase Program
  • $2.3 million in shares were withheld in the third quarter of 2022 to satisfy tax obligations related to the exercise of stock options and vesting of restricted stock units and performance-based restricted stock units
  • The Board of Directors of Tradeweb Markets Inc. declared a quarterly cash dividend of $0.08 per share of Class A common stock and Class B common stock. The dividend will be payable on December 15, 2022 to stockholders of record as of December 1, 2022

OTHER MATTERS

Updated Full-Year 2022 Guidance*

Adjusted expenses: $620 - 640 million (old: $620 - 655 million)

No change to other guidance:

  • Acquisition and Refinitiv Transaction related depreciation and amortization expense: $127 million
  • Assumed non-GAAP tax rate: ~22.0%
  • Capital expenditures and capitalization of software development: $62 - 68 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.

CONFERENCE CALL

Tradeweb Markets will hold a conference call to discuss third quarter 2022 results starting at 9:30 AM EDT today, October 27, 2022. A live, audio webcast of the conference call along with related materials will be available at http://investors.tradeweb.com. Alternatively, interested parties can access the call by registering at https://register.vevent.com/register/BIacb82889d7314bbdb89f62512916cf38. Once registered, the participant will receive an email confirmation with the dial-in information and a personalized PIN number to access the conference call. Only one person can use this PIN at a time. If you need additional PINs please register multiple times.

After the conference call, an archived recording will be available at http://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 approximately 2,500 clients in more than 65 countries. On average, Tradeweb facilitated more than $1.0 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.

INCOME STATEMENT

Dollars in Thousands, Except Per Share Data

 
   
 

 

 

Three Months Ended

 

Nine Months Ended

 
 

 

 

September 30,

 

September 30,

 
 

 

 

2022

 

2021

 

2022

 

2021

 
 

Revenues

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 
 

Transaction fees and commissions

 

$

228,015

 

$

206,316

 

$

717,489

 

$

629,513

 
 

Subscription fees

 

 

41,342

 

 

41,390

 

 

124,337

 

 

117,141

 
 

Refinitiv market data fees

 

 

15,370

 

 

15,002

 

 

46,354

 

 

45,045

 
 

Other

 

 

2,388

 

 

2,617

 

 

7,559

 

 

7,865

 
 

Total revenue

 

 

287,115

 

 

265,325

 

 

895,739

 

 

799,564

 
 

 

 

 

 

 

 

 

 

 

 
 

Expenses

 

 

 

 

 

 

 

 

 
 

Employee compensation and benefits

 

 

102,720

 

 

98,036

 

 

330,601

 

 

300,107

 
 

Depreciation and amortization

 

 

44,778

 

 

44,823

 

 

133,998

 

 

127,656

 
 

Technology and communications

 

 

16,816

 

 

14,747

 

 

48,626

 

 

42,248

 
 

General and administrative

 

 

6,892

 

 

9,561

 

 

24,806

 

 

21,809

 
 

Professional fees

 

 

9,400

 

 

8,897

 

 

25,832

 

 

28,993

 
 

Occupancy

 

 

3,699

 

 

3,733

 

 

10,857

 

 

11,104

 
 

Total expenses

 

 

184,305

 

 

179,797

 

 

574,720

 

 

531,917

 
 

Operating income

 

 

102,810

 

 

85,528

 

 

321,019

 

 

267,647

 
 

Net interest income (expense)

 

 

3,413

 

 

(361)

 

 

3,507

 

 

(1,179)

 
 

Income before taxes

 

 

106,223

 

 

85,167

 

 

324,526

 

 

266,468

 
 

Provision for income taxes

 

 

(24,657)

 

 

(19,862)

 

 

(63,915)

 

 

(53,365)

 
 

Net income

 

 

81,566

 

 

65,305

 

 

260,611

 

 

213,103

 
 

Less: Net income attributable to non-controlling interests

 

 

12,483

 

 

10,542

 

 

40,219

 

 

35,165

 
 

Net income attributable to Tradeweb Markets Inc.

 

$

69,083

 

$

54,763

 

$

220,392

 

$

177,938

 
 

 

 

 

 

 

 

 

 

 

 
 

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

 

 

 

 

 

 

 

 

 
 

Basic

 

$

0.34

 

$

0.27

 

$

1.08

 

$

0.89

 
 

Diluted

 

$

0.33

 

$

0.26

 

$

1.06

 

$

0.86

 
 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 
 

Basic

 

 

205,721,162

 

 

202,238,122

 

 

204,767,261

 

 

201,029,196

 
 

Diluted

 

 

208,329,469

 

 

208,197,439

 

 

207,748,037

 

 

206,908,330

 
     
 
 

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,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

(dollars in thousands)

 

Net income

 

$

81,566

 

 

$

65,305

 

 

$

260,611

 

 

$

213,103

 

 

Acquisition transaction costs (1)

 

 

43

 

 

 

459

 

 

 

40

 

 

 

5,186

 

 

Net interest (income) expense

 

 

(3,413

)

 

 

361

 

 

 

(3,507

)

 

 

1,179

 

 

Depreciation and amortization

 

 

44,778

 

 

 

44,823

 

 

 

133,998

 

 

 

127,656

 

 

Stock-based compensation expense (2)

 

 

2,675

 

 

 

1,995

 

 

 

13,839

 

 

 

11,181

 

 

Provision for income taxes

 

 

24,657

 

 

 

19,862

 

 

 

63,915

 

 

 

53,365

 

 

Foreign exchange (gains) / losses (3)

 

 

(3,972

)

 

 

141

 

 

 

(6,306

)

 

 

(4,742

)

 

Tax receivable agreement liability adjustment (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

146,334

 

 

$

132,946

 

 

$

462,590

 

 

$

406,928

 

 

Less: Depreciation and amortization

 

 

(44,778

)

 

 

(44,823

)

 

 

(133,998

)

 

 

(127,656

)

 

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

 

 

31,558

 

 

 

32,956

 

 

 

95,088

 

 

 

92,799

 

 

Adjusted EBIT

 

$

133,114

 

 

$

121,079

 

 

$

423,680

 

 

$

372,071

 

 

Adjusted EBITDA margin (6)

 

 

51.0

%

 

 

50.1

%

 

 

51.6

%

 

 

50.9

%

 

Adjusted EBIT margin (6)

 

 

46.4

%

 

 

45.6

%

 

 

47.3

%

 

 

46.5

%

(1)

Represents transaction and other costs related to the NFI Acquisition, which closed in June 2021. Acquisition-related costs primarily include legal, consulting and advisory fees and severance costs incurred that relate to the acquisition transaction or subsequent planned merger of Execution Access, LLC with Dealerweb Inc.

(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 totaling $0.7 million and $1.5 million during the three months ended September 30, 2022 and 2021, respectively, and $4.5 million and $10.7 million during the nine months ended September 30, 2022 and 2021, respectively. 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 retiring CEO. During the three and nine months ended September 30, 2021, this adjustment also includes $0.5 million of non-cash accelerated stock-based compensation expense and related payroll taxes associated with our former CFO.

(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 the NFI Acquisition 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)

Adjusted EBITDA margin and Adjusted EBIT margin are defined as 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,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

(in thousands, except per share amounts)

 

Earnings per diluted share

 

$

0.33

 

 

$

0.26

 

 

$

1.06

 

 

$

0.86

 

 

Net income attributable to Tradeweb Markets Inc.

 

$

69,083

 

 

$

54,763

 

 

$

220,392

 

 

$

177,938

 

 

Net income attributable to non-controlling interests (1)

 

 

12,483

 

 

 

10,542

 

 

 

40,219

 

 

 

35,165

 

 

Net income

 

 

81,566

 

 

 

65,305

 

 

 

260,611

 

 

 

213,103

 

 

Provision for income taxes

 

 

24,657

 

 

 

19,862

 

 

 

63,915

 

 

 

53,365

 

 

Acquisition transaction costs (2)

 

 

43

 

 

 

459

 

 

 

40

 

 

 

5,186

 

 

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

 

 

31,558

 

 

 

32,956

 

 

 

95,088

 

 

 

92,799

 

 

Stock-based compensation expense (4)

 

 

2,675

 

 

 

1,995

 

 

 

13,839

 

 

 

11,181

 

 

Foreign exchange (gains) / losses (5)

 

 

(3,972

)

 

 

141

 

 

 

(6,306

)

 

 

(4,742

)

 

Tax receivable agreement liability adjustment (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income before income taxes

 

 

136,527

 

 

 

120,718

 

 

 

427,187

 

 

 

370,892

 

 

Adjusted income taxes (7)

 

 

(30,036

)

 

 

(26,558

)

 

 

(93,982

)

 

 

(81,596

)

 

Adjusted Net Income

 

$

106,491

 

 

$

94,160

 

 

$

333,205

 

 

$

289,296

 

 

Adjusted Diluted EPS (8)

 

$

0.45

 

 

$

0.39

 

 

$

1.40

 

 

$

1.22

 

(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 transaction and other costs related to the NFI Acquisition, which closed in June 2021. Acquisition-related costs primarily include legal, consulting and advisory fees and severance costs incurred that relate to the acquisition transaction or subsequent planned merger of Execution Access, LLC with Dealerweb Inc.

(3)

Represents intangible asset and acquired software amortization resulting from the NFI Acquisition 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 totaling $0.7 million and $1.5 million during the three months ended September 30, 2022 and 2021, respectively, and $4.5 million and $10.7 million during the nine months ended September 30, 2022 and 2021, respectively. 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 retiring CEO. During the three and nine months ended September 30, 2021, this adjustment also includes $0.5 million of non-cash accelerated stock-based compensation expense and related payroll taxes associated with our former CFO.

(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 22% applied to Adjusted Net Income before income taxes for each of the three and nine months ended September 30, 2022 and 2021.

(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,

 
 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 
 

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

 

 

208,329,469

 

 

208,197,439

 

 

207,748,037

 

 

206,908,330

 
 

Weighted average of other participating securities (1)

 

 

246,238

 

 

 

 

121,115

 

 

 
 

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

 

 

28,750,603

 

 

30,531,933

 

 

29,667,383

 

 

30,756,925

 
 

Adjusted diluted weighted average shares outstanding

 

 

237,326,310

 

 

238,729,372

 

 

237,536,535

 

 

237,665,255

 
 

Adjusted Net Income (in thousands)

 

$

106,491

 

$

94,160

 

$

333,205

 

$

289,296

 
 

Adjusted Diluted EPS

 

$

0.45

 

$

0.39

 

$

1.40

 

$

1.22

 

(1)

Represents weighted average unvested restricted stock units and unsettled vested performance-based restricted stock units issued to certain retired executives 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,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

(in thousands)

 

Operating expenses

 

$

184,305

 

 

$

179,797

 

 

$

574,720

 

 

$

531,917

 

 

Acquisition transaction costs (1)

 

 

(43

)

 

 

(459

)

 

 

(40

)

 

 

(5,186

)

 

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

 

 

(31,558

)

 

 

(32,956

)

 

 

(95,088

)

 

 

(92,799

)

 

Stock-based compensation expense (3)

 

 

(2,675

)

 

 

(1,995

)

 

 

(13,839

)

 

 

(11,181

)

 

Foreign exchange gains / (losses) (4)

 

 

3,972

 

 

 

(141

)

 

 

6,306

 

 

 

4,742

 

 

Adjusted Expenses

 

$

154,001

 

 

$

144,246

 

 

$

472,059

 

 

$

427,493

 

(1)

Represents transaction and other costs related to the NFI Acquisition, which closed in June 2021. Acquisition-related costs primarily include legal, consulting and advisory fees and severance costs incurred that relate to the acquisition transaction or subsequent planned merger of Execution Access, LLC with Dealerweb Inc.

(2)

Represents intangible asset and acquired software amortization resulting from the NFI Acquisition 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 totaling $0.7 million and $1.5 million during the three months ended September 30, 2022 and 2021, respectively, and $4.5 million and $10.7 million during the nine months ended September 30, 2022 and 2021, respectively. 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 retiring CEO. During the three and nine months ended September 30, 2021, this adjustment also includes $0.5 million of non-cash accelerated stock-based compensation expense and related payroll taxes associated with our former CFO.

(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 Flows from Operating Activities to Free Cash Flow

 

 

2022

 

 

 

2021

 

 

 

 

(in thousands)

 

Cash flow from operating activities

 

$

616,473

 

 

$

526,072

 

 

Less: Capitalization of software development costs

 

 

(36,127

)

 

 

(33,995

)

 

Less: Purchases of furniture, equipment and leasehold improvements

 

 

(25,123

)

 

 

(14,720

)

 

Free Cash Flow

 

$

555,223

 

 

$

477,357

 

   
   

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,

 
 

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

 
 

 

 

(in thousands, except share and per share amounts)

 
 

Numerator:

 

 

 

 

 

 

 

 

 
 

Net income attributable to Tradeweb Markets Inc.

 

$

69,083

 

 

$

54,763

 

$

220,392

 

 

$

177,938

 
 

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

 

 

(82

)

 

 

 

 

(111

)

 

 

 
 

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

 

$

69,001

 

 

$

54,763

 

$

220,281

 

 

$

177,938

 
 

 

 

 

 

 

 

 

 

 

 
 

Denominator:

 

 

 

 

 

 

 

 

 
 

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

 

 

205,721,162

 

 

 

202,238,122

 

 

204,767,261

 

 

 

201,029,196

 
 

Dilutive effect of PRSUs

 

 

746,043

 

 

 

2,146,473

 

 

796,090

 

 

 

2,000,005

 
 

Dilutive effect of options

 

 

1,661,705

 

 

 

3,516,893

 

 

1,940,970

 

 

 

3,609,906

 
 

Dilutive effect of RSUs

 

 

200,559

 

 

 

295,951

 

 

243,716

 

 

 

269,223

 
 

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

 

 

208,329,469

 

 

 

208,197,439

 

 

207,748,037

 

 

 

206,908,330

 
 

 

 

 

 

 

 

 

 

 

 
 

Earnings per share - Basic

 

$

0.34

 

 

$

0.27

 

$

1.08

 

 

$

0.89

 
 

Earnings per share - Diluted

 

$

0.33

 

 

$

0.26

 

$

1.06

 

 

$

0.86

 

(1)

During the three and nine months ended September 30, 2022, there was a total of 246,238 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. There were none during the three and nine months ended September 30, 2021.

 
   
 

TRADEWEB MARKETS INC.

REVENUES BY ASSET CLASS (UNAUDITED)

 
     
 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 
 

 

 

September 30,

 

 

 

 

 
 

 

 

2022

 

2021

 

$ Change

 

% Change

 
 

Revenues

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 
 

 

 

(dollars in thousands)

 
 

Rates

 

$

93,673

 

$

54,494

 

$

80,888

 

$

58,530

 

$

12,785

 

$

(4,036

)

 

15.8%

 

(6.9)%

 
 

Credit

 

 

71,724

 

 

6,377

 

 

65,742

 

 

6,501

 

 

5,982

 

 

(124

)

 

9.1%

 

(1.9)%

 
 

Equities

 

 

18,969

 

 

2,308

 

 

14,235

 

 

2,222

 

 

4,734

 

 

86

 

 

33.3%

 

3.9%

 
 

Money Markets

 

 

8,507

 

 

4,462

 

 

7,198

 

 

4,023

 

 

1,309

 

 

439

 

 

18.2%

 

10.9%

 
 

Market Data

 

 

 

 

21,222

 

 

 

 

20,515

 

 

 

 

707

 

 

 

3.4%

 
 

Other

 

 

 

 

5,379

 

 

 

 

5,471

 

 

 

 

(92

)

 

 

(1.7)%

 
 

Total revenue

 

$

192,873

 

$

94,242

 

$

168,063

 

$

97,262

 

$

24,810

 

$

(3,020

)

 

14.8%

 

(3.1)%

 
     
   
 

TRADEWEB MARKETS INC.

AVERAGE VARIABLE FEES PER MILLION DOLLARS OF VOLUME (UNAUDITED)

 
     
 

 

 

Three Months Ended

 

 

 
 

 

 

September 30,

 

YoY

 
 

 

 

2022

 

2021

 

% Change

 
 

Rates

 

$

2.23

 

$

2.15

 

3.9%

 
 

Cash Rates

 

$

2.23

 

$

1.95

 

14.2%

 
 

Rates Derivatives

 

$

2.24

 

$

2.42

 

(7.4)%

 
 

Swaps / Swaptions Tenor (greater than 1 year)

 

$

3.46

 

$

3.73

 

(7.3)%

 
 

Other Rates Derivatives (1)

 

$

0.27

 

$

0.20

 

33.8%

 
 

 

 

 

 

 

 

 

 
 

Credit

 

$

38.03

 

$

45.67

 

(16.7)%

 
 

Cash Credit (2)

 

$

150.38

 

$

144.48

 

4.1%

 
 

Credit Derivatives and U.S. Cash “EP”

 

$

6.33

 

$

6.16

 

2.8%

 
 

 

 

 

 

 

 

 

 
 

Equities

 

$

18.69

 

$

15.20

 

23.0%

 
 

Cash Equities

 

$

29.33

 

$

24.37

 

20.3%

 
 

Equity Derivatives

 

$

5.28

 

$

5.23

 

0.9%

 
 

 

 

 

 

 

 

 

 
 

Money Markets (Cash)

 

$

0.33

 

$

0.33

 

1.7%

 
 

 

 

 

 

 

 

 

 
 

Total Fees per Million

 

$

2.73

 

$

2.70

 

1.1%

 
 

Total Fees per Million excluding Other Rates Derivatives (3)

 

$

3.05

 

$

2.97

 

2.8%

 

(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 and (2) 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)

 
     
 

 

 

 

2022 Q3

 

2021 Q3

 

YoY

 
 

Asset Class

Product

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

ADV

 
 

Rates

Cash

 

$

324,153

$

20,773,078

 

$

336,832

$

21,610,725

 

(3.76) %

 
 

 

U.S. Government Bonds

 

 

123,736

 

7,919,082

 

 

124,638

 

7,976,859

 

(0.72) %

 
 

 

European Government Bonds

 

 

33,338

 

2,166,946

 

 

28,800

 

1,900,795

 

15.76 %

 
 

 

Mortgages

 

 

162,542

 

10,402,677

 

 

179,636

 

11,496,734

 

(9.52) %

 
 

 

Other Government Bonds

 

 

4,538

 

284,373

 

 

3,757

 

236,337

 

20.78 %

 
 

 

Derivatives

 

 

328,636

 

21,158,402

 

 

246,981

 

15,992,323

 

33.06 %

 
 

 

Swaps/Swaptions ≥ 1Y

 

 

203,038

 

13,066,309

 

 

154,970

 

10,039,311

 

31.02 %

 
 

 

Swaps/Swaptions < 1Y

 

 

123,817

 

7,978,143

 

 

91,240

 

5,903,695

 

35.70 %

 
 

 

Futures

 

 

1,780

 

113,950

 

 

770

 

49,317

 

131.08 %

 
 

 

Total

 

 

652,789

 

41,931,480

 

 

583,813

 

37,603,048

 

11.81 %

 
 

Credit

Cash

 

 

9,275

 

595,883

 

 

8,440

 

543,735

 

9.88 %

 
 

 

U.S. High Grade - Fully Electronic

 

 

3,282

 

210,038

 

 

2,602

 

166,536

 

26.12 %

 
 

 

U.S. High Grade - Electronically Processed

 

 

2,475

 

158,411

 

 

1,775

 

113,615

 

39.43 %

 
 

 

U.S. High Yield - Fully Electronic

 

 

465

 

29,751

 

 

539

 

34,519

 

(13.81) %

 
 

 

U.S. High Yield - Electronically Processed

 

 

351

 

22,482

 

 

296

 

18,928

 

18.77 %

 
 

 

European Credit

 

 

1,367

 

88,838

 

 

1,707

 

112,653

 

(19.93) %

 
 

 

Municipal Bonds

 

 

354

 

22,673

 

 

173

 

11,056

 

105.08 %

 
 

 

Chinese Bonds

 

 

863

 

56,067

 

 

1,233

 

78,893

 

(30.03) %

 
 

 

Other Credit Bonds

 

 

118

 

7,622

 

 

116

 

7,534

 

1.96 %

 
 

 

Derivatives

 

 

20,020

 

1,289,959

 

 

13,796

 

895,891

 

45.12 %

 
 

 

Swaps

 

 

20,020

 

1,289,959

 

 

13,796

 

895,891

 

45.12 %

 
 

 

Total

 

 

29,295

 

1,885,842

 

 

22,237

 

1,439,626

 

31.74 %

 
 

Equities

Cash

 

 

8,803

 

565,898

 

 

7,551

 

487,508

 

16.58 %

 
 

 

U.S. ETFs

 

 

6,299

 

403,126

 

 

5,421

 

346,950

 

16.19 %

 
 

 

European ETFs

 

 

2,504

 

162,772

 

 

2,130

 

140,558

 

17.59 %

 
 

 

Derivatives

 

 

7,009

 

449,209

 

 

6,992

 

449,243

 

0.25 %

 
 

 

Convertibles/Swaps/Options

 

 

4,384

 

281,007

 

 

3,559

 

229,356

 

23.18 %

 
 

 

Futures

 

 

2,625

 

168,202

 

 

3,433

 

219,886

 

(23.53) %

 
 

 

Total

 

 

15,812

 

1,015,106

 

 

14,543

 

936,751

 

8.73 %

 
 

Money Markets

Cash

 

 

400,726

 

25,721,492

 

 

343,528

 

22,137,906

 

16.65 %

 
 

 

Repurchase Agreements (Repo)

 

 

382,040

 

24,525,135

 

 

329,366

 

21,231,148

 

15.99 %

 
 

 

Other Money Markets

 

 

18,686

 

1,196,357

 

 

14,162

 

906,758

 

31.95 %

 
 

 

Total

 

 

400,726

 

25,721,492

 

 

343,528

 

22,137,906

 

16.65 %

 
 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

YoY

 

 

Total

 

$

1,098,622    

$

70,553,920

 

$

964,120    

$

62,117,331

 

14.00 %

 

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

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 2022 guidance, and 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 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 performance and 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 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 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.

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 Annual Report on Form 10-K for capitalized terms not otherwise defined herein.

TRADEWEB SOCIAL MEDIA

Investors and others should note that Tradeweb Markets announces material financial and operational information using its investor relations website, press releases, SEC filings and public conference calls and webcasts. Information about Tradeweb Markets, 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 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 Markets 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.

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 Diluted EPS, Adjusted Expenses and Free Cash Flow, which are supplemental financial measures that are not calculated or 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.

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, earnings per share, operating income, operating expenses or cash flow from operating activities or any other financial measure 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 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.

We present certain growth information 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 growth, which is a non-GAAP financial measure, is defined as growth 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 growth as a supplemental metric to evaluate our underlying performance between periods by removing the impact of foreign currency fluctuations. We present certain constant currency growth 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.

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.

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