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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)

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."

SELECT FINANCIAL

RESULTS

2Q21

2Q20

 

Change

 

Constant

Currency

Growth (1)

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

 

 

 

 

 

 

 

 

 

 

GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

Total revenue

$

260,840

 

$

212,107

 

23.0

%

20.2

%

Rates

$

134,003

 

$

112,823

 

18.8

%

15.9

%

Credit

$

72,212

 

$

49,105

 

47.1

%

44.3

%

Equities

$

17,397

 

$

15,407

 

12.9

%

8.7

%

Money Markets

$

11,340

 

$

10,539

 

7.6

%

5.7

%

Market Data

$

20,007

 

$

18,497

 

8.2

%

6.1

%

Other

$

5,881

 

$

5,736

 

2.5

%

2.5

%

Net income

$

66,233

 

$

42,408

 

56.2

%

 

 

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

55,316

$

30,496

81.4

%

 

 

Diluted EPS

$

0.27

 

$

0.16

 

68.8

%

 

 

Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (1)

$

131,898

 

$

101,309

 

30.2

%

27.7

%

Adjusted EBITDA margin (1)

50.6

%

47.8

%

280

bps

297

bps

Adjusted EBIT (1)

$

120,271

 

$

90,521

 

32.9

%

30.2

%

Adjusted EBIT margin (1)

46.1

%

42.7

%

343

bps

353

bps

Adjusted Net Income (1)

$

93,558

 

$

70,383

 

32.9

%

30.2

%

Adjusted Diluted EPS (1)

$

0.39

 

$

0.30

 

30.0

%

30.0

%

ADV (US $bn)

(Unaudited)

Asset Class

Product

2Q21

2Q20

YoY

Rates

Cash

$

319

 

$

298

 

7.2

%

 

Derivatives

257

 

209

 

22.7

%

 

Total

576

 

507

 

13.6

%

Credit

Cash

10

 

8

 

21.9

%

 

Derivatives

9

 

10

 

(15.5)

%

 

Total

18

 

18

 

0.8

%

Equities

Cash

8

 

6

 

30.2

%

 

Derivatives

8

 

4

 

113.1

%

 

Total

16

 

10

 

60.6

%

Money Markets

Cash

367

 

244

 

50.6

%

 

Total

367

 

244

 

50.6

%

 

Total

$

977

 

$

778

 

25.5

%

(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.

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.

 

TRADEWEB MARKETS INC.

INCOME STATEMENT

Dollars in Thousands, Except Per Share Data

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

Revenues

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

Transaction fees and commissions

 

$

205,381

 

 

$

160,261

 

 

$

423,197

 

 

$

343,578

 

Subscription fees

 

37,883

 

 

35,006

 

 

75,751

 

 

69,489

 

Refinitiv market data fees

 

14,926

 

 

14,565

 

 

30,043

 

 

29,193

 

Other

 

2,650

 

 

2,275

 

 

5,248

 

 

4,453

 

Total revenue

 

260,840

 

 

212,107

 

 

534,239

 

 

446,713

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

98,449

 

 

88,866

 

 

202,071

 

 

179,386

 

Depreciation and amortization

 

41,867

 

 

37,919

 

 

82,833

 

 

75,095

 

Technology and communications

 

13,957

 

 

12,042

 

 

27,501

 

 

22,360

 

General and administrative

 

8,789

 

 

7,523

 

 

12,248

 

 

15,863

 

Professional fees

 

10,368

 

 

6,609

 

 

20,096

 

 

13,520

 

Occupancy

 

3,618

 

 

3,509

 

 

7,371

 

 

7,235

 

Total expenses

 

177,048

 

 

156,468

 

 

352,120

 

 

313,459

 

Operating income

 

83,792

 

 

55,639

 

 

182,119

 

 

133,254

 

Net interest income (expense)

 

(325)

 

 

(286)

 

 

(818)

 

 

413

 

Income before taxes

 

83,467

 

 

55,353

 

 

181,301

 

 

133,667

 

Provision for income taxes

 

(17,234)

 

 

(12,945)

 

 

(33,503)

 

 

(28,774)

 

Net income

 

66,233

 

 

42,408

 

 

147,798

 

 

104,893

 

Less: Net income attributable to non-controlling interests

 

10,917

 

 

11,912

 

 

24,623

 

 

30,469

 

Net income attributable to Tradeweb Markets Inc.

 

$

55,316

 

 

$

30,496

 

 

$

123,175

 

 

$

74,424

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

$

0.27

 

 

$

0.17

 

 

$

0.61

 

 

$

0.43

 

Diluted

 

$

0.27

 

 

$

0.16

 

 

$

0.60

 

 

$

0.41

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

201,749,985

 

 

177,649,501

 

 

200,414,714

 

 

171,942,125

 

Diluted

 

207,463,960

 

 

185,489,824

 

 

206,253,756

 

 

180,008,891

 

 

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 June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

Net income

 

$

66,233

 

 

$

42,408

 

 

$

147,798

 

 

$

104,893

 

Acquisition transaction costs (1)

 

2,966

 

 

 

 

4,727

 

 

 

Net interest (income) expense

 

325

 

 

286

 

 

818

 

 

(413)

 

Depreciation and amortization

 

41,867

 

 

37,919

 

 

82,833

 

 

75,095

 

Stock-based compensation expense (2)

 

2,803

 

 

4,995

 

 

9,186

 

 

8,492

 

Provision for income taxes

 

17,234

 

 

12,945

 

 

33,503

 

 

28,774

 

Foreign exchange (gains) / losses (3)

 

470

 

 

2,756

 

 

(4,883)

 

 

4,118

 

Tax receivable agreement liability adjustment (4)

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

131,898

 

 

$

101,309

 

 

$

273,982

 

 

$

220,959

 

Less: Depreciation and amortization

 

(41,867)

 

 

(37,919)

 

 

(82,833)

 

 

(75,095)

 

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

 

30,240

 

 

27,131

 

 

59,843

 

 

53,404

 

Adjusted EBIT

 

$

120,271

 

 

$

90,521

 

 

$

250,992

 

 

$

199,268

 

Adjusted EBITDA margin (6)

 

50.6

%

 

47.8

%

 

51.3

%

 

49.5

%

Adjusted EBIT margin (6)

 

46.1

%

 

42.7

%

 

47.0

%

 

44.6

%

(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.

(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 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 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 amortization and increased tangible asset and capitalized software depreciation and amortization resulting from the NFI Acquisition and 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.

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

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

Earnings per diluted share

 

$

0.27

 

 

$

0.16

 

 

$

0.60

 

 

$

0.41

 

 

 

 

 

 

 

 

 

 

Net income attributable to Tradeweb Markets Inc.

 

$

55,316

 

 

$

30,496

 

 

$

123,175

 

 

$

74,424

 

Net income attributable to non-controlling interests (1)

 

10,917

 

 

11,912

 

 

24,623

 

 

30,469

 

Net income

 

66,233

 

 

42,408

 

 

147,798

 

 

104,893

 

Provision for income taxes

 

17,234

 

 

12,945

 

 

33,503

 

 

28,774

 

Acquisition transaction costs (2)

 

2,966

 

 

 

 

4,727

 

 

 

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

 

30,240

 

 

27,131

 

 

59,843

 

 

53,404

 

Stock-based compensation expense (4)

 

2,803

 

 

4,995

 

 

9,186

 

 

8,492

 

Foreign exchange (gains) / losses (5)

 

470

 

 

2,756

 

 

(4,883)

 

 

4,118

 

Tax receivable agreement liability adjustment (6)

 

 

 

 

 

 

 

 

Adjusted Net Income before income taxes

 

119,946

 

 

90,235

 

 

250,174

 

 

199,681

 

Adjusted income taxes (7)

 

(26,388)

 

 

(19,852)

 

 

(55,038)

 

 

(43,930)

 

Adjusted Net Income

 

$

93,558

 

 

$

70,383

 

 

$

195,136

 

 

$

155,751

 

Adjusted Diluted EPS (8)

 

$

0.39

 

 

$

0.30

 

 

$

0.82

 

 

$

0.67

 

(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. During the three and six months ended June 30, 2021, Acquisition-related costs primarily include legal, consulting and advisory fees and severance costs incurred that relate to the acquisition transaction.

(3)

Represents intangible asset amortization and increased tangible asset and capitalized software depreciation and amortization resulting from the NFI Acquisition and 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 exercises of such options during the applicable period.

(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 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 six months ended June 30, 2021 and 2020.

(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” 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

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

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

 

207,463,960

 

 

185,489,824

 

 

206,253,756

 

 

180,008,891

 

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

 

30,531,933

 

 

48,132,630

 

 

30,871,285

 

 

52,888,588

 

Adjusted diluted weighted average shares outstanding

 

237,995,893

 

 

233,622,454

 

 

237,125,041

 

 

232,897,479

 

Adjusted Net Income (in thousands)

 

$

93,558

 

 

$

70,383

 

 

$

195,136

 

 

$

155,751

 

Adjusted Diluted EPS

 

$

0.39

 

 

$

0.30

 

 

$

0.82

 

 

$

0.67

 

(1)

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.

 

Reconciliation of Operating Expenses to Adjusted Expenses

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Operating expenses

 

$

177,048

 

 

$

156,468

 

 

$

352,120

 

 

$

313,459

 

Acquisition transaction costs (1)

 

(2,966)

 

 

 

 

(4,727)

 

 

 

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

 

(30,240)

 

 

(27,131)

 

 

(59,843)

 

 

(53,404)

 

Stock-based compensation expense (3)

 

(2,803)

 

 

(4,995)

 

 

(9,186)

 

 

(8,492)

 

Foreign exchange gains / (losses) (4)

 

(470)

 

 

(2,756)

 

 

4,883

 

 

(4,118)

 

Adjusted Expenses

 

$

140,569

 

 

$

121,586

 

 

$

283,247

 

 

$

247,445

 

(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.

(2)

Represents intangible asset amortization and increased tangible asset and capitalized software depreciation and amortization resulting from the NFI Acquisition and 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 exercises of such options during the applicable period.

(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.

Reconciliation of Cash Flows from Operating Activities to Free Cash Flow

 

Trailing Twelve Months Ended

June 30, 2021

 

 

(in thousands)

Cash flow from operating activities

 

$

482,687

 

Less: Capitalization of software development costs

 

(33,215)

 

Less: Purchases of furniture, equipment and leasehold improvements

 

(15,651)

 

Free Cash Flow

 

$

433,821

 

 

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.:

EPS: Net income attributable to Tradeweb Markets Inc.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share amounts)

Numerator:

 

 

 

 

 

 

 

 

Net income attributable to Tradeweb Markets Inc.

 

$

55,316

 

 

$

30,496

 

 

$

123,175

 

 

$

74,424

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

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

 

201,749,985

 

 

177,649,501

 

 

200,414,714

 

 

171,942,125

 

Dilutive effect of equity-settled PRSUs

 

2,021,234

 

 

2,492,567

 

 

1,926,771

 

 

2,265,494

 

Dilutive effect of options

 

3,461,230

 

 

5,168,379

 

 

3,656,412

 

 

5,694,964

 

Dilutive effect of RSUs

 

231,511

 

 

179,377

 

 

255,859

 

 

106,308

 

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

 

207,463,960

 

 

185,489,824

 

 

206,253,756

 

 

180,008,891

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic

 

$

0.27

 

 

$

0.17

 

 

$

0.61

 

 

$

0.43

 

Earnings per share - Diluted

 

$

0.27

 

 

$

0.16

 

 

$

0.60

 

 

$

0.41

 

 

TRADEWEB MARKETS INC.

GROSS REVENUES BY ASSET CLASS (UNAUDITED)

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

 

 

 

June 30, 2021

 

June 30, 2020

 

$ Change

 

% Change

Revenues

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 

Variable

 

Fixed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands)

Rates

 

$

79,766

 

 

$

54,237

 

 

$

62,101

 

 

$

50,722

 

 

$

17,665

 

 

$

3,515

 

 

28.4

%

 

6.9

%

Credit

 

65,712

 

 

6,500

 

 

43,731

 

 

5,374

 

 

21,981

 

 

1,126

 

 

50.3

%

 

21.0

%

Equities

 

14,612

 

 

2,785

 

 

12,905

 

 

2,502

 

 

1,707

 

 

283

 

 

13.2

%

 

11.3

%

Money Markets

 

7,242

 

 

4,098

 

 

6,445

 

 

4,094

 

 

797

 

 

4

 

 

12.4

%

 

0.1

%

Market Data

 

 

 

20,007

 

 

 

 

18,497

 

 

 

 

1,510

 

 

 

 

8.2

%

Other

 

 

 

5,881

 

 

 

 

5,736

 

 

 

 

145

 

 

 

 

2.5

%

Total revenue

 

$

167,332

 

 

$

93,508

 

 

$

125,182

 

 

$

86,925

 

 

$

42,150

 

 

$

6,583

 

 

33.7

%

 

7.6

%

 

TRADEWEB MARKETS INC.

AVERAGE VARIABLE FEES PER MILLION DOLLARS OF VOLUME (UNAUDITED)

 

 

 

Three Months Ended June 30,

 

YoY

 

 

2021

 

2020

 

% Change

Rates

 

$

2.18

 

 

$

1.95

 

 

11.7

%

Cash Rates

 

$

2.02

 

 

$

1.94

 

 

4.4

%

Rates Derivatives

 

$

2.38

 

 

$

1.97

 

 

20.5

%

Swaps / Swaptions Tenor (greater than 1 year)

 

$

3.54

 

 

$

2.84

 

 

24.6

%

Other Rates Derivatives (1)

 

$

0.28

 

 

$

0.18

 

 

51.6

%

 

 

 

 

 

 

 

Credit

 

$

57.62

 

 

$

39.03

 

 

47.6

%

Cash Credit (2)

 

$

138.52

 

 

$

134.56

 

 

2.9

%

Credit Derivatives and U.S. Cash "EP"

 

$

7.91

 

 

$

7.30

 

 

8.3

%

 

 

 

 

 

 

 

Equities

 

$

14.50

 

 

$

20.58

 

 

(29.5)

%

Cash Equities

 

$

23.21

 

 

$

27.24

 

 

(14.8)

%

Equity Derivatives

 

$

5.34

 

 

$

9.10

 

 

(41.3)

%

 

 

 

 

 

 

 

Money Markets (Cash)

 

$

0.31

 

 

$

0.42

 

 

(26.3)

%

 

 

 

 

 

 

 

Total Fees per Million

 

$

2.70

 

 

$

2.56

 

 

5.3

%

Total Fees per Million excluding Other Rates Derivatives (3)

 

$

2.95

 

 

$

2.79

 

 

5.6

%

(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)

 

 

 

 

2021 Q2

 

2020 Q2

 

YoY

Asset Class

Product

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

ADV

Rates

Cash

 

$

319,023

 

$

20,348,109

 

 

$

297,599

 

$

18,717,824

 

 

7.20

%

 

U.S. Government Bonds

 

106,803

 

6,835,404

 

 

92,260

 

5,812,399

 

 

15.76

%

 

European Government Bonds

 

30,515

 

1,891,937

 

 

27,105

 

1,680,500

 

 

12.58

%

 

Mortgages

 

177,570

 

11,364,474

 

 

173,551

 

10,933,713

 

 

2.32

%

 

Other Government Bonds

 

4,135

 

256,293

 

 

4,682

 

291,211

 

 

(11.69)

%

 

Derivatives

 

256,648

 

16,209,757

 

 

209,160

 

13,078,196

 

 

22.70

%

 

Swaps/Swaptions ≥ 1Y

 

165,825

 

10,441,873

 

 

140,999

 

8,811,975

 

 

17.61

%

 

Swaps/Swaptions < 1Y

 

89,975

 

5,713,635

 

 

67,767

 

4,241,352

 

 

32.77

%

 

Futures

 

848

 

54,248

 

 

395

 

24,870

 

 

114.74

%

 

Total

 

575,671

 

36,557,865

 

 

506,759

 

31,796,020

 

 

13.60

%

Credit

Cash

 

9,519

 

599,774

 

 

7,812

 

486,716

 

 

21.85

%

 

U.S. High Grade

 

5,083

 

325,344

 

 

4,653

 

293,156

 

 

9.25

%

 

U.S. High Yield

 

836

 

53,524

 

 

486

 

30,648

 

 

71.91

%

 

European Credit

 

1,911

 

118,454

 

 

1,364

 

84,598

 

 

40.02

%

 

Municipal Bonds

 

193

 

12,367

 

 

247

 

15,566

 

 

(21.79)

%

 

Chinese Bonds

 

1,373

 

82,377

 

 

1,010

 

59,608

 

 

35.89

%

 

Other Credit Bonds

 

122

 

7,709

 

 

50

 

3,139

 

 

142.93

%

 

Derivatives

 

8,566

 

540,584

 

 

10,132

 

633,602

 

 

(15.45)

%

 

Swaps

 

8,566

 

540,584

 

 

10,132

 

633,602

 

 

(15.45)

%

 

Total

 

18,085

 

1,140,358

 

 

17,944

 

1,120,317

 

 

0.79

%

Equities

Cash

 

8,240

 

516,734

 

 

6,329

 

396,849

 

 

30.20

%

 

U.S. ETFs

 

5,885

 

370,746

 

 

4,480

 

282,235

 

 

31.36

%

 

Europe ETFs

 

2,355

 

145,988

 

 

1,849

 

114,614

 

 

27.37

%

 

Derivatives

 

7,817

 

490,906

 

 

3,667

 

230,348

 

 

113.14

%

 

Options/Convertibles/Swaps

 

3,850

 

241,047

 

 

849

 

52,941

 

 

353.50

%

 

Futures

 

3,967

 

249,859

 

 

2,819

 

177,407

 

 

40.75

%

 

Total

 

16,056

 

1,007,641

 

 

9,996

 

627,197

 

 

60.63

%

Money Markets

Cash

 

367,063

 

23,332,283

 

 

243,681

 

15,309,908

 

 

50.63

%

 

Repurchase Agreements (Repo)

 

353,446

 

22,461,843

 

 

230,978

 

14,510,278

 

 

53.02

%

 

Other Money Markets

 

13,617

 

870,441

 

 

12,703

 

799,630

 

 

7.19

%

 

Total

 

367,063

 

23,332,283

 

 

243,681

 

15,309,908

 

 

50.63

%

 

 

 

 

 

 

 

 

 

 

 

 

 

ADV (USD mm)

Volume (USD mm)

 

ADV (USD mm)

Volume (USD mm)

 

YoY

 

Total

 

$

976,876

 

$

62,038,148

 

 

$

778,380

 

$

48,853,443

 

 

25.50

%

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.

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