Tradeweb Reports Second Quarter 2021 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 June 30, 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210729005348/en/

Tradeweb CEO Lee Olesky (Photo: Business Wire)

$260.8 million quarterly revenues increased 23.0% (20.2% on a constant currency basis) compared to prior year period

$976.9 billion average daily volume (“ADV”) for the quarter, an increase of 25.5% compared to prior year period with new ADV records in U.S. High Yield credit and Repurchase Agreements. In U.S. credit, Tradeweb set new records for its share of fully electronic TRACE volume: High Grade was 12.1% up from 5.8% in the prior year period and High Yield was 4.8%, up from 1.5% over prior year period

$66.2 million net income and $93.6 million adjusted net income for the quarter, increases of 56.2%, and 32.9% respectively from prior year period

50.6% adjusted EBITDA margin or $131.9 million adjusted EBITDA for the quarter, compared to 47.8% or $101.3 million respectively for prior year period

$0.27 diluted earnings per share (“Diluted EPS”) for the quarter and $0.39 adjusted diluted earnings per share

$0.08 per share quarterly cash dividend declared; $51.7 million of shares repurchased

Lee Olesky, CEO of Tradeweb Markets:

"Broadening client choice was an important theme this quarter in both credit and rates. Our clients utilized a wider range of electronic trading tools and protocols in credit including RFQ, Tradeweb AllTrade and Portfolio Trading — further evidence that electronic trading activity continues to grow in terms of both volume and sophistication. With the acquisition of the Nasdaq Fixed Income platform completed in June, clients trading wholesale U.S. Treasuries have more choice between our popular streams protocol and the new central limit order book. From a broader Tradeweb perspective, this acquisition is a great opportunity and we believe it positions us well to drive additional shareholder value."

DISCUSSION OF RESULTS

Rates – Revenues of $134.0 million in the second quarter of 2021 increased 18.8% compared to prior year period (15.9% on a constant currency basis). Increased client activity in streams and session-based trading drove higher volumes in U.S. Treasuries, while volumes in higher fee long-tenor swaps/swaptions were driven by a mix of: strong engagement from international clients; faster growth in the request-for-market (RFM) protocol; and record trading across emerging market currencies.

Credit – Revenues of $72.2 million in the second quarter of 2021 increased 47.1% compared to prior year period (44.3% on a constant currency basis). Credit posted its second-best quarter ever, driven by record U.S. electronic high yield and strong U.S. investment grade trading, as well as robust European credit trading. Clients utilized a wider range of protocols and services, with continued solid growth in RFQ and electronic portfolio trading. In U.S. credit, Tradeweb set new platform records for its share of fully electronic TRACE volume: High Grade was 12.1% up from 5.8% in the prior year period and High Yield was 4.8%, up from 1.5% over prior year period.

Equities – Revenues of $17.4 million in the second quarter of 2021 increased 12.9% compared to prior year period (8.7% on a constant currency basis). Client growth and adoption, particularly among institutional clients, continued to drive overall volumes.

Money Markets – Revenues of $11.3 million in the second quarter of 2021 increased 7.6% compared to prior year period (5.7% on a constant currency basis). Strong growth in Global Repo activity was supported by the continued addition of new clients and dealers on the platform. Retail money markets activity remained pressured by the low interest rate environment.

Market Data – Revenues of $20.0 million in the second quarter of 2021 increased 8.2% compared to prior year period (6.1% on a constant currency basis). The increase was derived from increased third party market data fees, revenue from our APA reporting service and Refinitiv market data fees.

Other – Revenues of $5.9 million in the second quarter of 2021 increased 2.5% compared to prior year period (2.5% on a constant currency basis).

Operating Expenses – Operating expenses of $177.0 million in the second quarter of 2021 increased 13.2% compared to $156.5 million in the prior year period due to: higher employee compensation and benefits associated with higher headcount to support growth and higher performance-related compensation; higher depreciation and amortization expense; higher professional fees primarily related to the NFI Acquisition (as defined below); and higher general and administrative expenses as we gradually recover from the pandemic, which were partially offset by lower foreign exchange losses. Adjusted Expenses of $140.6 million increased 15.6% (12.8% 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 and higher performance-related compensation; as well as higher general and administrative expenses. Please see "Non-GAAP Financial Measures" below for additional information.

RECENT HIGHLIGHTS

Second Quarter 2021

• Completed acquisition of Nasdaq’s U.S. fixed income electronic trading platform (the “NFI Acquisition”) for $190 million in cash
• Appointed Balbir Bakhshi, Chief Risk Officer, London Stock Exchange Group plc, to the Tradeweb Markets Board of Directors succeeding Brian West
• Joined the Climate Bonds Initiative’s Partners Program, a global movement seeking to mobilize bond markets for climate change solutions, and announced that Climate Bonds Initiative-screened Green bonds accounted for $79 billion of trading volume executed on Tradeweb in 2020, an increase of 65% over 2019 volumes
• Announced collaboration with Amazon Web Services to broaden access to Tradeweb U.S. Treasury and U.K. Gilt closing price data through AWS Data Exchange, making it easier to find, subscribe to, and use third-party data in the cloud
• Recognized in numerous awards including: Swap Execution Facility of the Year (GlobalCapital); Best SSA Bond Trading Platform (GlobalCapital); Best Trading Venue for OTC Products (Markets Media); Best Fixed Income Trading Platform (Financial News); Trading Initiative of the Year (Financial News); Best in Fintech – Elsa Lau (Markets Media)

July 2021

• Tradeweb completed the first fully electronic institutional Secured Overnight Financing Rate (SOFR) swap spread trade, executed via the Tradeweb Swap Execution Facility (TW SEF) with BlackRock and J.P. Morgan as counterparties to the trade

CAPITAL MANAGEMENT

• $681.2 million in cash and cash equivalents and an undrawn $500 million credit facility at June 30, 2021
• On June 25, 2021, Tradeweb completed the NFI Acquisition for an all-cash purchase price of $190.0 million, net of cash acquired, net of deposits with clearing organizations acquired and prior to working capital adjustments
• Non-acquisition related capital expenditures and capitalization of software development in second quarter 2021: $12.9 million
• Free cash flow for the trailing twelve months ended June 30, 2021 of $433.8 million, up 23.0% year over year. See “Non-GAAP Financial Measures” for additional information
• During the second quarter of 2021, as part of its Share Repurchase Program, Tradeweb purchased 617,644 shares of Class A common stock, at an average price of $83.67, for purchases totaling $51.7 million. As of June 30, 2021, a total of $98.3 million remained available for repurchase pursuant to the Share Repurchase Program
• $8.0 million in shares were withheld in the second quarter of 2021 to satisfy tax obligations related to the exercise of stock options
• 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 September 15, 2021 to stockholders of record as of September 1, 2021

OTHER MATTERS

Updated Full-Year 2021 Guidance*

We have updated guidance to incorporate: our recent NFI acquisition; expectation of a strong revenue environment in the second half of 2021; and increased investment to support our growth businesses.

• Adjusted Expenses: $565 - $580 million
• Acquisition and Refinitiv Transaction related depreciation and amortization expense: $124 million
• Assumed non-GAAP tax rate: 22.0%
• Capital expenditures and capitalization of software development: $49 - $53 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 second quarter 2021 results starting at 9:30 AM EDT today, July 29, 2021. 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 8481771. 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 $920 billion in notional value traded per day over the past four fiscal quarters. For more information, please go to www.tradeweb.com.

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

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.:

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 2021 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.

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.

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.

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. 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210729005348/en/