TW
$56.48
Tradeweb Markets
($3.27)
(5.47%)
Earnings Details
3rd Quarter September 2020
Wednesday, October 28, 2020 7:00:00 AM
Tweet Share Watch
Summary

Tradeweb Markets (TW) Reports 3rd Quarter Earnings

Tradeweb Markets (TW) reported 3rd Quarter September 2020 earnings of $0.29 per share on revenue of $212.9 million. The consensus earnings estimate was $0.28 per share on revenue of $208.5 million. Revenue grew 5.9% on a year-over-year basis.

Towers Watson & Co is a professional services company that helps organizations improve performance through effective people, risk and financial management.

Results
Reported Earnings
$0.29
Earnings Whisper
-
Consensus Estimate
$0.28
Reported Revenue
$212.9 Mil
Revenue Estimate
$208.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Tradeweb Reports Third Quarter 2020 Financial Results

NEW YORK--(BUSINESS WIRE)--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, 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201028005408/en/

Lee Olesky, CEO of Tradeweb Markets

Lee Olesky, CEO of Tradeweb Markets

$212.9 million quarterly gross revenues increased 5.9% (4.7% on a constant currency basis) year over year

$780.3 billion average daily volume (“ADV”), a decrease of 4.5% year over year. Quarterly records for TRACE share in U.S. High Grade Credit, U.S. High Grade Credit Fully Electronic, and U.S. High Yield Credit. Quarterly records for ADV in China Bonds and Repos

$47.0 million GAAP net income, a decrease of 3.1%, due to a higher tax rate and lower interest rates on cash balances. $69.9 million adjusted net income, an increase of 13.5% from the prior year period

47.4% adjusted EBITDA margin or $100.9 million adjusted EBITDA for the quarter compared to 46.5% or $93.4 million, respectively, for the prior year period

$0.19 diluted earnings per share (“Diluted EPS”) and $0.30 adjusted diluted earnings per share

$0.08 per share quarterly cash dividend declared

Lee Olesky, CEO of Tradeweb Markets:

“Tradeweb’s business performed exceedingly well in the third quarter, as increased adoption of electronic trading and heightened debt issuance helped fuel record TRACE share in U.S. credit and higher volumes in U.S. treasuries, European government bonds and mortgages. We also saw broader interest in a range of trading protocols and tools including electronic portfolio trading, anonymous A2A trading and automated execution. Throughout the quarter we continued to innovate for our clients, including the launch of a new trading platform for mortgage originators and the introduction of a new channel to help foreign investors gain access to the local Chinese bond market.”

SELECT FINANCIAL
RESULTS

3Q20

 

3Q19

 

Change

Constant
Currency
Growth(1)

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

GAAP Financial Measures

Gross revenue

$

212,870

 

 

$

200,981

 

 

5.9

%

4.7

%

Rates

$

115,766

 

 

$

115,505

 

 

0.2

%

(1.0)

%

Credit

$

50,216

 

 

$

39,578

 

 

26.9

%

25.4

%

Equities

$

11,857

 

 

$

12,333

 

 

(3.9)

%

(6.3)

%

Money Markets

$

10,491

 

 

$

10,480

 

 

0.1

%

(0.7)

%

Market Data

$

18,598

 

 

$

16,914

 

 

10.0

%

9.2

%

Other

$

5,942

 

 

$

6,171

 

 

(3.7)

%

(3.7)

%

Net income

$

47,048

 

 

$

48,578

 

 

(3.1)

%

 

 

Net Income attributable to Tradeweb Markets Inc.(2)$

36,812

 

$

29,612

24.3

%

Diluted EPS

$

0.19

 

 

$

0.20

 

 

(5.0)

%

 

 

Non-GAAP Financial Measures

Adjusted EBITDA(1)

$

100,913

 

 

$

93,449

 

 

8.0

%

5.8

%

Adjusted EBITDA

margin(1)

47.4

%

46.5

%

+91

bps

+51

bps

Adjusted EBIT(1)

$

90,015

 

 

$

83,096

 

 

8.3

%

5.9

%

Adjusted EBIT margin(1)

42.3

%

41.3

%

+94

bps

+50

bps

Adjusted Net Income(1)

$

69,939

 

 

$

61,627

 

 

13.5

%

11.0

%

Adjusted Diluted EPS(1)

$

0.30

 

 

$

0.27

 

 

11.1

%

7.4

%

(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

3Q20

3Q19

YoY

Rates

Cash

311

 

285

 

9.3

%

 

Derivatives

179

 

279

 

(35.8)

%

 

Total

490

 

563

 

(13.0)

%

Credit

Cash

7

 

5

 

29.0

%

 

Derivatives

13

 

12

 

6.6

%

 

Total

20

 

17

 

13.7

%

Money Markets

Cash

262

 

229

 

14.3

%

 

Total

262

 

229

 

14.3

%

Equities

Cash

5

 

4

 

20.2

%

 

Derivatives

4

 

3

 

27.3

%

 

Total

9

 

7

 

23.0

%

 

Total

780

 

817

 

(4.5)

%

 

DISCUSSION OF RESULTS

Rates – Revenues from rates of $115.8 million in the third quarter of 2020 increased 0.2% compared to the third quarter of 2019 (-1.0% on a constant currency basis). ADV in rates of $490.1 billion for the third quarter of 2020 decreased 13.0% compared with the third quarter of 2019. Reduced rates volatility led to lower trading volumes in interest rate swaps. This was partially offset by strong trading activity in U.S. treasuries fueled by elevated issuance, and strong trading activity in mortgages as low rates drove new home sales and refinancing activity.

Credit – Revenues from credit of $50.2 million in the third quarter of 2020 increased 26.9% compared to the third quarter of 2019 (25.4% on a constant currency basis) as continued growth in portfolio trading and anonymous trading protocols helped drive TRACE High Grade market share to a record 17.7% (7.7% fully electronic) and TRACE High Yield market share to a record 4.8% (2.5% fully electronic). ADV in credit of $19.6 billion for the third quarter increased 13.7% over the prior year period.

Money Markets – Revenues from money markets of $10.5 million in the third quarter of 2020 increased 0.1% compared to the third quarter of 2019 (-0.7% on a constant currency basis). ADV in money markets of $261.6 billion for the third quarter of 2020 increased 14.3% due to record volume in bilateral repurchase agreements.

Equities – Revenues from equities of $11.9 million in the third quarter of 2020 decreased 3.9% compared to the third quarter of 2019 (-6.3% on a constant currency basis). ADV in equities of $9.0 billion for the third quarter of 2020 increased 23.0%, while strength in U.S. ETF trading was offset by lower volumes in European ETFs.

Market Data – Revenues from market data of $18.6 million in the third quarter of 2020 increased 10.0% compared to the third quarter of 2019 (9.2% on a constant currency basis) due to delivery of additional data under our market data license agreements with Refinitiv.

Other – Revenues from other of $5.9 million in the third quarter of 2020 decreased 3.7% compared to the third quarter of 2019 (-3.7% on a constant currency basis).

Operating Expenses – Operating expenses of $154.3 million in the third quarter of 2020 increased 8.1% compared to the third quarter of 2019 due to higher employee compensation and benefits expense, as well as higher depreciation and amortization expense. Adjusted Expenses were $122.9 million in the third quarter of 2020, an increase of 4.2% from the prior year period, primarily due to higher employee compensation and benefits expense resulting from increased headcount, as well as higher technology and communications expense, partially offset by lower general and administrative expense. Please see "Non-GAAP Financial Measures" below for additional information.

CAPITAL MANAGEMENT

  • $677.4 million in cash and cash equivalents and a fully undrawn $500 million credit facility at September 30, 2020.
  • Capital expenditures and capitalization of software development: $10.2 million.
  • Free cash flow for the trailing twelve months ended September 30, 2020 of $380.0 million up 47.9%. See “Non-GAAP Financial Measures” for additional information.
  • 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, 2020 to stockholders of record as of December 1, 2020.

OTHER MATTERS

Updated Full-Year 2020 Guidance*

  • Adjusted Expenses: $495 - $505 million (lower half of range)
    • Includes ~$5 million of technology & communications investments (data strategy and cybersecurity)
    • Includes ~$7 - $8 million of G&A in Q4 excluding the impact of FX
  • Acquisition and Refinitiv Transaction related depreciation and amortization expense: $110 million
  • Assumed non-GAAP tax rate: 22.0%
  • Capital expenditures and capitalization of software development: $45 - $50 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 2020 results starting at 9:00 a.m. Eastern Time today, October 28, 2020. 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 dialing 866-221-1629 (U.S.) or +1 470-495-9175 (international) and entering passcode 3586933. 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 $780 billion 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 (UNAUDITED)
Dollars in Thousands, Except Per Share Data

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

 

 

Transaction fees

$

120,582

 

 

$

112,746

 

 

$

383,552

 

 

$

319,338

 

Subscription fees

36,217

 

 

35,387

 

 

105,706

 

 

104,398

 

Commissions

39,593

 

 

37,590

 

 

120,201

 

 

108,200

 

Refinitiv market data fees

14,273

 

 

13,251

 

 

43,466

 

 

40,252

 

Other

2,205

 

 

2,007

 

 

6,658

 

 

6,070

 

Gross revenue

212,870

 

 

200,981

 

 

659,583

 

 

578,258

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Employee compensation and benefits

83,967

 

 

79,644

 

 

263,353

 

 

252,912

 

Depreciation and amortization

38,857

 

 

35,133

 

 

113,952

 

 

102,928

 

Technology and communications

12,037

 

 

9,527

 

 

34,397

 

 

29,086

 

General and administrative

8,657

 

 

7,507

 

 

24,520

 

 

25,961

 

Professional fees

7,388

 

 

7,272

 

 

20,908

 

 

20,981

 

Occupancy

3,443

 

 

3,640

 

 

10,678

 

 

10,900

 

Total expenses

154,349

 

 

142,723

 

 

467,808

 

 

442,768

 

Operating income

58,521

 

 

58,258

 

 

191,775

 

 

135,490

 

Net interest income (expense)

(349)

 

 

636

 

 

64

 

 

1,669

 

Income before taxes

58,172

 

 

58,894

 

 

191,839

 

 

137,159

 

Provision for income taxes

(11,124)

 

 

(10,316)

 

 

(39,898)

 

 

(21,413)

 

Net income

$

47,048

 

 

$

48,578

 

 

$

151,941

 

 

$

115,746

 

Less: Pre-IPO net income attributable to Tradeweb Markets LLC

 

 

 

 

 

 

42,352

 

Net income attributable to Tradeweb Markets Inc. and non-controlling interests

47,048

 

 

48,578

 

 

151,941

 

 

73,394

 

Less: Net income attributable to non-controlling interests

10,236

 

 

18,966

 

 

40,705

 

 

30,954

 

Net income attributable to Tradeweb Markets Inc.

$

36,812

 

 

$

29,612

 

 

$

111,236

 

 

$

42,440

 

 

 

 

 

 

 

 

 

EPS calculations for post-IPO and pre-IPO periods (1)

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

Basic

$

0.20(a)

 

 

$

0.21(a)

 

 

$

0.63(a)

 

 

$ 0.19(b) / 0.30(a)

Diluted

$

0.19(a)

 

 

$

0.20(a)

 

 

$

0.60(a)

 

 

$ 0.19(b) / 0.28(a)

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

187,774,170(a)

 

142,935,206(a)

 

177,257,994(a)

 

222,222,197(b) /
142,934,221(a)

Diluted

194,955,695(a)

 

151,362,643(a)

 

185,026,108(a)

 

223,320,457(b) /
151,158,760(a)

(1)

In April 2019, the Company completed the Reorganization Transactions and the IPO, which, among other things, resulted in Tradeweb Markets Inc. becoming the successor of Tradeweb Markets LLC for financial reporting purposes. As a result, earnings per share information for the pre-IPO period is not comparable to the earnings per share information for the post-IPO period. Therefore, earnings per share information is being presented separately for the pre-IPO and post-IPO periods.

 

 

(a) Presents information for Tradeweb Markets Inc. (post-IPO period).

 

 

(b) Presents information for Tradeweb Markets LLC (pre-IPO period).

 

 

See “Basic and Diluted EPS Calculations” and “Presentation” below for additional information

TRADEWEB MARKETS INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
Dollars in Thousands, Except per Share Data

 

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

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2020

2019

 

2020

 

2019

 

(in thousands)

Net income

 

$

47,048

 

$

48,578

 

$

151,941

 

$

115,746

 

Net interest income (expense)

 

349

 

(636)

 

(64)

 

(1,669)

 

Depreciation and amortization

 

38,857

 

35,133

 

113,952

 

102,928

 

Stock-based compensation expense(1)

 

1,816

 

1,995

 

10,308

 

22,398

 

Provision for income taxes

 

11,124

 

10,316

 

39,898

 

21,413

 

Unrealized foreign exchange (gains) / losses

 

1,492

 

(2,499)

 

5,449

 

(1,215)

 

(Gain)/Loss from revaluation of foreign denominated cash(2)

 

227

 

562

 

388

 

1,120

 

Adjusted EBITDA

 

$

100,913

 

$

93,449

 

$

321,872

 

$

260,721

 

Less: Depreciation and amortization

 

(38,857)

 

(35,133)

 

(113,952)

 

(102,928)

 

Add: Acquisition and Refinitiv Transaction related D&A(3)

 

27,959

 

24,780

 

81,363

 

72,122

 

Adjusted EBIT

 

$

90,015

 

$

83,096

 

$

289,283

 

$

229,915

 

Adjusted EBITDA margin(4)

 

47.4

%

46.5

%

48.8

%

45.1

%

Adjusted EBIT margin(4)

 

42.3

%

41.3

%

43.9

%

39.8

%

(1)

 

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 exercises of such options during the applicable period.

(2)

 

Represents foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

(3)

 

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

(4)

 

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

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to

 

Three Months Ended September 30,

Nine Months Ended September 30,

Adjusted Net Income and Adjusted Diluted EPS

 

2020

 

2019

 

2020

 

2019

 

(in thousands, except per share amounts)

Earnings per diluted share(1)

 

$

0.19

 

(a)

$

0.20

 

(a)

$

0.60

 

(a)

$ 0.19 / 0.28

(b)/(a)

Pre-IPO net income attributable to Tradeweb Markets LLC (1)

 

 

 

 

 

 

 

42,352

 

(b)

Net income attributable to Tradeweb Markets Inc.(1)

 

36,812

 

(a)

29,612

 

(a)

111,236

 

(a)

42,440

 

(a)

Net income attributable to non-controlling interests (1)(2)

 

10,236

 

(a)

18,966

 

(a)

40,705

 

(a)

30,954

 

(a)

Net income(1)

 

$

47,048

 

(a)

$

48,578

 

(a)

$

151,941

 

(a)

$

115,746

 

(b)/(a)

Provision for income taxes

 

11,124

 

 

10,316

 

 

39,898

 

 

21,413

 

 

Acquisition and Refinitiv Transaction related D&A(3)

 

27,959

 

 

24,780

 

 

81,363

 

 

72,122

 

 

Stock-based compensation expense(4)

 

1,816

 

 

1,995

 

 

10,308

 

 

22,398

 

 

Unrealized foreign exchange (gains) / losses

 

1,492

 

 

(2,499)

 

 

5,449

 

 

(1,215)

 

 

Loss from revaluation of foreign denominated cash(5)

 

227

 

 

562

 

 

388

 

 

1,120

 

 

Adjusted Net Income before income taxes

 

89,666

 

 

83,732

 

 

289,347

 

 

231,584

 

 

Adjusted income taxes(6)

 

(19,727)

 

 

(22,105)

 

 

(63,656)

 

 

(61,139)

 

 

Adjusted Net Income

 

$

69,939

 

 

$

61,627

 

 

$

225,691

 

 

$

170,445

 

 

Adjusted Diluted EPS(1)(7)

 

$

0.30

 

(a)

$

0.27

 

(a)

$

0.97

 

(a)

$ 0.23 / 0.51

(b)/(a)

(1)

In April 2019, the Company completed the Reorganization Transactions and the IPO. As a result, certain earnings information is being presented separately for Tradeweb Markets LLC and Tradeweb Markets Inc.

a) Presents information for Tradeweb Markets Inc. (post-IPO period).

b) Presents information for Tradeweb Markets LLC (pre-IPO period).

See the “Basic and Diluted EPS Calculations” table below for additional information.

(2)

For post-IPO periods, 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.

(3)

Represents acquisition-related intangibles amortization and increased tangible asset and capitalized software depreciation and amortization resulting from the Refinitiv Transaction and the application of pushdown accounting (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 exercises of such options during the applicable period.

(5)

Represents foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

(6)

Represents corporate income taxes at an assumed effective tax rate of 22.0% and 26.4% applied to Adjusted Net Income before income taxes for the three and nine months ended September 30, 2020 and 2019, respectively. For pre-IPO periods, this adjustment assumes Tradeweb Markets LLC was subject to a corporate tax rate for the periods presented.

(7)

Due to the Reorganization Transactions and the IPO completed in April 2019, shares outstanding during the nine months ended September 30, 2019 represent shares of TWM LLC (pre-IPO period) and shares of Class A and Class B common stock of Tradeweb Markets, Inc. (post-IPO period). Shares outstanding during the three and nine months ended September 30, 2020 represent shares of Class A and Class B Common Stock of Tradeweb Markets Inc. (post-IPO period). 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" 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

 

 

 

 

 

 

 

Pre-IPO Period

 

Post-IPO Period

 

Three Months
Ended September 30,
2020

 

Three Months
Ended September 30,
2019

 

Nine Months
Ended September 30,
2020

 

Nine Months
Ended September 30,
2019

 

Nine Months
Ended September 30,

2019

 

 

Diluted weighted average TWM LLC shares outstanding

 

 

 

 

 

 

 

223,320,457

 

 

 

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

 

194,955,695

 

 

151,362,643

 

 

185,026,108

 

 

 

 

151,158,760

 

Assumed exchange of LLC interests for shares of Class A or Class B common stock (1)

 

39,513,246

 

 

79,289,005

 

 

48,397,598

 

 

 

 

79,289,005

 

Adjusted diluted weighted average shares outstanding

 

234,468,941

 

 

230,651,648

 

 

233,423,706

 

 

223,320,457

 

 

230,447,765

 

Adjusted Net Income (in thousands)

 

$

69,939

 

 

$

61,627

 

 

$

225,691

 

 

$

52,190

 

 

$

118,255

 

Adjusted Diluted EPS

 

$

0.30

 

 

$

0.27

 

 

$

0.97

 

 

$

0.23

 

 

$

0.51

 

(1)

Assumes the full exchange 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.

 

 

 

 

 

 

 

 

 

Reconciliation of Operating Expenses to Adjusted Expenses

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

(in thousands)

Operating Expenses

 

$

154,349

 

 

$

142,723

 

 

$

467,808

 

 

$

442,768

 

Acquisition and Refinitiv Transaction related D&A(1)

 

(27,959)

 

 

(24,780)

 

 

(81,363)

 

 

(72,122)

 

Stock-based compensation expense(2)

 

(1,816)

 

 

(1,995)

 

 

(10,308)

 

 

(22,398)

 

Unrealized foreign exchange gains / (losses)

 

(1,492)

 

 

2,499

 

 

(5,449)

 

 

1,215

 

Loss from revaluation of foreign-denominated cash(3)

 

(227)

 

 

(562)

 

 

(388)

 

 

(1,120)

 

Adjusted Expenses

 

$

122,855

 

 

$

117,885

 

 

$

370,300

 

 

$

348,343

 

(1)

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

(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 exercises of such options during the applicable period.

(3)

Represents foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

 

Reconciliation of Cash Flows from Operating Activities to Free Cash Flow

 

Trailing Twelve Months
Ended September 30, 2020

 

 

(in thousands)

Cash flow from operating activities

 

$

424,070

 

Less: Capitalization of software development costs

 

(30,345)

 

Less: Purchases of furniture, equipment and leasehold improvements

 

(13,698)

 

Free Cash Flow

 

$

380,027

 

 

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. (post-IPO period) and Tradeweb Markets LLC (pre-IPO period):

EPS: Post-IPO net income attributable to Tradeweb Markets Inc.

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

(in thousands, except share and per share amounts)

Numerator:

 

 

 

 

 

 

 

 

Post-IPO net income attributable to Tradeweb Markets Inc.

 

$

36,812

 

 

$

29,612

 

 

$

111,236

 

 

$

42,440

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

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

 

187,774,170

 

 

142,935,206

 

 

177,257,994

 

 

142,934,221

 

Dilutive effect of equity-settled PRSUs

 

2,584,192

 

 

2,492,381

 

 

2,371,727

 

 

2,355,938

 

Dilutive effect of options

 

4,402,391

 

 

5,935,056

 

 

5,264,106

 

 

5,868,601

 

Dilutive effect of RSUs

 

194,942

 

 

 

 

132,281

 

 

 

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

 

 

194,955,695

 

 

 

151,362,643

 

 

 

185,026,108

 

 

 

151,158,760

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic

 

$

0.20

 

 

$

0.21

 

 

$

0.63

 

 

$

0.30

 

Earnings per share - Diluted

 

$

0.19

 

 

$

0.20

 

 

$

0.60

 

 

$

0.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS: Pre-IPO net income attributable to Tradeweb Markets LLC(1)

 

 

 

 

 

 

 

Nine Months Ended
September 30,
2019

(in thousands, except share and per share amounts)

Numerator:

 

 

 

 

 

 

 

 

Pre-IPO net income attributable to Tradeweb Markets LLC

 

 

 

 

 

 

 

$

42,352

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted average LLC Interests outstanding - Basic

 

 

 

 

 

 

 

222,222,197

 

Dilutive effect of equity-settled PRSUs

 

 

 

 

 

 

 

1,098,260

 

Weighted average LLC Interests outstanding - Diluted

 

 

 

 

 

 

 

 

223,320,457

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic

 

 

 

 

 

 

 

$

0.19

 

Earnings per share - Diluted

 

 

 

 

 

 

 

$

0.19

 

(1)

Earnings per share and weighted average shares outstanding for the pre-IPO period has been computed to give effect to the Reorganization Transactions, including the amendment and restatement of the fourth amended and restated limited liability company agreement of Tradeweb Markets LLC to, among other things, (i) provide for a new single class of common membership interests in Tradeweb Markets LLC (“LLC Interests”) and (ii) exchange all of the original members’ existing membership interests for LLC interests.

TRADEWEB MARKETS INC.
GROSS REVENUES BY ASSET CLASS (UNAUDITED)

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

 

 

 

 

September 30,
2020

 

September 30,
2019

 

$ Change

 

% Change

Revenues

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

(dollars in thousands)

Rates

 

$

64,139

 

 

$

51,627

 

 

$

64,885

 

 

$

50,620

 

 

$

(746)

 

 

$

1,007

 

 

(1.1)

 

%

 

2.0

 

%

Credit

 

44,278

 

 

5,938

 

 

34,417

 

 

5,161

 

 

9,861

 

 

777

 

 

28.7

 

%

 

15.1

 

%

Equities

 

9,329

 

 

2,528

 

 

9,896

 

 

2,437

 

 

(567)

 

 

91

 

 

(5.7)

 

%

 

3.7

 

%

Money Markets

 

6,390

 

 

4,101

 

 

6,743

 

 

3,737

 

 

(353)

 

 

364

 

 

(5.2)

 

%

 

9.7

 

%

Market Data

 

 

 

18,598

 

 

 

 

16,914

 

 

 

 

1,684

 

 

 

%

 

10.0

 

%

Other

 

 

 

5,942

 

 

 

 

6,171

 

 

 

 

(229)

 

 

 

%

 

(3.7)

 

%

Gross revenue

 

$

124,136

 

 

$

88,734

 

 

$

115,941

 

 

$

85,040

 

 

$

8,195

 

 

$

3,694

 

 

7.1

 

%

 

4.3

 

%

 

TRADEWEB MARKETS INC.
AVERAGE VARIABLE FEES PER MILLION DOLLARS OF VOLUME (UNAUDITED)

 

 

 

Three Months Ended September 30,

 

YoY

 

 

2020

 

2019

 

% Change

Rates

 

$

2.03

 

 

$

1.79

 

 

13.7

%

Cash Rates

 

$

1.83

 

 

$

1.95

 

 

(6.0)

%

Rates Derivatives

 

$

2.37

 

 

$

1.62

 

 

46.4

%

Swaps / Swaptions Tenor (greater than 1 year)

 

$

3.37

 

 

$

3.00

 

 

12.1

%

Other Rates Derivatives(1)

 

$

0.25

 

 

$

0.05

 

 

412.0

%

 

 

 

 

 

 

 

Credit

 

$

34.83

 

 

$

30.81

 

 

13.1

%

Cash Credit(2)

 

$

127.70

 

 

$

117.59

 

 

8.6

%

Credit Derivatives and U.S. Cash 'EP'

 

$

6.01

 

 

$

6.23

 

 

(3.7)

%

 

 

 

 

 

 

 

Equities

 

$

16.01

 

 

$

20.78

 

 

(23.0)

%

Cash Equities

 

$

20.38

 

 

$

28.09

 

 

(27.4)

%

Equity Derivatives

 

$

9.46

 

 

$

9.26

 

 

2.2

%

 

 

 

 

 

 

 

Money Markets (Cash)

 

$

0.38

 

 

$

0.46

 

 

(17.3)

%

 

 

 

 

 

 

 

Total Fees per Million

 

$

2.47

 

 

$

2.20

 

 

12.0

%

Total Fees per Million excluding Other Rates Derivatives(3)

 

$

2.65

 

 

$

2.62

 

 

1.1

%

(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 blended fees per million across all periods presented.

TRADEWEB MARKETS INC.
AVERAGE DAILY VOLUME (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

2020 Q3

 

2019 Q3

 

YoY

Asset Class

Product

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

ADV

Rates

Cash

 

311,039

 

19,951,648

 

 

284,622

 

18,260,540

 

 

9.28

%

 

U.S. Government Bonds

 

86,962

 

5,565,577

 

 

82,124

 

5,255,922

 

 

5.89

%

 

European Government Bonds

 

24,309

 

1,604,396

 

 

23,372

 

1,542,537

 

 

4.01

%

 

Mortgages

 

195,985

 

12,543,046

 

 

175,476

 

11,230,439

 

 

11.69

%

 

Other Government Bonds

 

3,782

 

238,629

 

 

3,651

 

231,642

 

 

3.60

%

 

Derivatives

 

179,076

 

11,612,291

 

 

278,794

 

18,046,653

 

 

(35.77)

%

 

Swaps/Swaptions = 1Y

 

122,362

 

7,919,286

 

 

148,230

 

9,612,484

 

 

(17.45)

%

 

Swaps/Swaptions < 1Y

 

56,318

 

3,667,678

 

 

129,982

 

8,396,929

 

 

(56.67)

%

 

Futures

 

396

 

25,327

 

 

582

 

37,240

 

 

(31.99)

%

 

Total

 

490,114

 

31,563,939

 

 

563,416

 

36,307,193

 

 

(13.01)

%

Credit

Cash

 

7,037

 

455,507

 

 

5,455

 

352,772

 

 

28.98

%

 

U.S. High Grade

 

3,818

 

244,359

 

 

2,483

 

158,921

 

 

53.76

%

 

U.S. High Yield

 

406

 

25,974

 

 

329

 

21,072

 

 

23.26

%

 

European Credit

 

1,270

 

83,831

 

 

1,203

 

79,409

 

 

5.57

%

 

Municipal Bonds

 

201

 

12,851

 

 

226

 

14,433

 

 

(10.97)

%

 

Chinese Bonds

 

1,277

 

84,292

 

 

1,157

 

75,201

 

 

10.39

%

 

Other Credit Bonds

 

64

 

4,201

 

 

57

 

3,735

 

 

12.42

%

 

Derivatives

 

12,538

 

815,611

 

 

11,763

 

764,357

 

 

6.59

%

 

Swaps

 

12,538

 

815,611

 

 

11,763

 

764,357

 

 

6.59

%

 

Total

 

19,574

 

1,271,118

 

 

17,218

 

1,117,129

 

 

13.68

%

Money Markets

Cash

 

261,590

 

16,847,205

 

 

228,795

 

14,701,645

 

 

14.33

%

 

Repurchase Agreements (Repo)

 

250,039

 

16,106,552

 

 

210,969

 

13,558,356

 

 

18.52

%

 

Other Money Markets

 

11,551

 

740,653

 

 

17,827

 

1,143,289

 

 

(35.20)

%

 

Total

 

261,590

 

16,847,205

 

 

228,795

 

14,701,645

 

 

14.33

%

Equities

Cash

 

5,408

 

349,289

 

 

4,499

 

291,410

 

 

20.21

%

 

U.S. ETFs

 

3,815

 

244,189

 

 

2,755

 

176,292

 

 

38.51

%

 

Europe ETFs

 

1,592

 

105,101

 

 

1,744

 

115,118

 

 

(8.70)

%

 

Derivatives

 

3,624

 

233,482

 

 

2,846

 

184,720

 

 

27.32

%

 

Options/Convertibles/Swaps

 

1,188

 

77,469

 

 

1,275

 

83,725

 

 

(6.79)

%

 

Futures

 

2,436

 

156,014

 

 

1,571

 

100,996

 

 

55.00

%

 

Total

 

9,032

 

582,772

 

 

7,345

 

476,130

 

 

22.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

YoY

 

Total

 

780,311

 

50,265,034

 

 

816,774

 

52,602,097

 

 

(4.46)

%

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 2020 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. In addition, statements herein relating to the COVID-19 pandemic, the potential impacts of which remain inherently uncertain, 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.

PRESENTATION

The historical financial information and other disclosures contained in this press release relate to periods that ended both prior to and after the completion of the Reorganization Transactions and the IPO of Tradeweb Markets Inc. (unless the context otherwise requires, together with its subsidiaries, referred to as “we,” “our,” “Tradeweb,” “Tradeweb Markets” or the “Company”). The IPO closed 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. The historical financial information contained in this press release relating to periods prior to and including March 31, 2019, which we refer to as the “pre-IPO period,” pertain to TWM LLC, the predecessor of Tradeweb Markets Inc. for financial reporting purposes. The historical financial information contained in this press release relating to periods beginning on April 1, 2019, and through and including September 30, 2020, which we refer to as the “post-IPO period,” pertain to Tradeweb Markets Inc. The pre-IPO period excludes, and the post-IPO period includes, our financial results from April 1, 2019 through April 3, 2019, which are not material.

On October 1, 2018, Refinitiv Holdings Ltd. (“Refinitiv”), which is controlled by certain investment funds affiliated with The Blackstone Group L.P., an affiliate of Canada Pension Plan Investment Board, an affiliate of GIC Special Investments Pte. Ltd. and certain co-investors, indirectly acquired substantially all of the financial and risk business of Thomson Reuters Corporation and Thomson Reuters Corporation indirectly acquired a non-controlling ownership interest in Refinitiv (collectively, the “Refinitiv Transaction”). As a result of the Refinitiv Transaction, as a consolidating subsidiary of Refinitiv, we accounted for the Refinitiv Transaction using pushdown accounting. Due to the change in the basis of accounting resulting from the application of pushdown accounting, the financial information for the period beginning on October 1, 2018, and through and including September 30, 2020, or the “successor period,” and the financial information for the periods prior to, and including, September 30, 2018, or the “predecessor period,” are not comparable. However, the change in basis resulting from the Refinitiv Transaction did not impact certain financial information, specifically revenues and certain expenses.

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 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. 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.

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 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, and may not be comparable to similarly titled measures used by other companies.

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 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.

Investor Relations
Ashley Serrao + 1 646 430 6027
Ashley.Serrao@Tradeweb.com

Media Relations
Daniel Noonan + 1 646 767 4677
Daniel.Noonan@Tradeweb.com

Source: Tradeweb Markets Inc.