Tradeweb Reports First Quarter 2024 Financial Results

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Tradeweb Reports First Quarter 2024 Financial Results




Tradeweb Reports First Quarter 2024 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 March 31, 2024.


$408.7 million quarterly revenues, an increase of 24.1% (23.8% on a constant currency basis) compared to prior year period

$1.9 trillion average daily volume (“ADV”) for the quarter, an increase of 39.1% compared to prior year period; quarterly ADV records in fully electronic U.S. High Grade credit, U.S. government bonds, European government bonds, swaps/swaptions ≥ 1-year, European credit, U.S. ETFs, equity convertibles/swaps/options, global repurchase agreements; record 17.6% share of fully electronic U.S. High Grade TRACE

$143.4 million net income and $167.9 million adjusted net income for the quarter, increases of 40.3% and 30.1% respectively from prior year period

53.7% adjusted EBITDA margin and $219.5 million adjusted EBITDA for the quarter, compared to 52.3% and $172.2 million respectively for prior year period

$0.59 diluted earnings per share (“Diluted EPS”) and $0.71 adjusted diluted earnings per share for the quarter

$0.10 per share quarterly cash dividend declared

Billy Hult, CEO of Tradeweb:

“We had a very strong start to 2024, continuing last year’s momentum thanks to broad-based organic growth and a number of important milestones. Our quarterly ADV climbed 39% from the prior year period to a record $1.9 trillion, with several more ADV records set across rates, credit, equities and money markets. Tradeweb captured a record 17.6% share of U.S. High Grade TRACE (+420 bps from the prior year period), reflecting steady growth in an area of strategic focus and investment for us. In January, we finalized our acquisition of r8fin, a technology provider that specializes in algorithmic-based execution for U.S. Treasuries and interest rate futures, and we feel great about how this will strengthen our offering with macro hedge funds. In April, we agreed to acquire ICD, a leading institutional investment technology provider for corporate treasury organizations, which will add Corporates as a new client channel with significant cross-sell opportunities. We also recently celebrated the five-year anniversary of Tradeweb’s IPO, and we remain laser-focused on keeping continued innovation and collaboration at the heart of Tradeweb’s success. Now more than ever, we believe the future of trading is multi-asset class — and innovative technology is how markets are going to get there.”

SELECT FINANCIAL RESULTS

 

1Q24

 

 

1Q23

 

Change

Constant

Currency

Change(1)

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

 

 

 

 

 

 

GAAP Financial Measures

 

 

 

 

 

 

Total revenue

$

408,739

 

$

329,249

 

24.1

%

23.8

%

Rates

$

214,093

 

$

170,505

 

25.6

%

25.3

%

Credit

$

115,839

 

$

89,017

 

30.1

%

29.8

%

Equities

$

27,050

 

$

26,203

 

3.2

%

2.8

%

Money Markets

$

16,791

 

$

14,807

 

13.4

%

13.1

%

Market Data

$

29,022

 

$

22,434

 

29.4

%

28.8

%

Other

$

5,944

 

$

6,283

 

(5.4)

%

(5.4)

%

Net income

$

143,382

 

$

102,193

 

40.3

%

 

 
Net income attributable to Tradeweb Markets Inc. (2)

$

126,142

 

$

87,856

 

43.6

 %  

Diluted EPS

$

0.59

 

$

0.42

 

40.5

%

 

 

Net income margin

 

35.1

%

 

31.0

%

+404

bps

 

 

Non-GAAP Financial Measures

 

 

 

 

 

 

Adjusted EBITDA (1)

$

219,528

 

$

172,203

 

27.5

%

28.1

%

Adjusted EBITDA margin (1)

 

53.7

%

 

52.3

%

+141

bps

+179

bps

Adjusted EBIT (1)

$

204,558

 

$

158,416

 

29.1

%

29.8

%

Adjusted EBIT margin (1)

 

50.0

%

 

48.1

%

+193

bps

+231

bps

Adjusted Net Income (1)

$

167,925

 

$

129,035

 

30.1

%

30.8

%

Adjusted Diluted EPS (1)

$

0.71

 

$

0.54

 

31.5

%

29.6

%
ADV (US $bn)

(Unaudited)

Asset Class

Product

 

1Q24

  

 

1Q23

  

YoY

Rates

Cash

$

462

  

$

363

  

27.3

%

 

Derivatives

 

799

  

 

509

  

57.1

%

 

Total

 

1,261

  

 

871

  

44.7

%

Credit

Cash

 

17

  

 

11

  

51.5

%

 

Derivatives

 

18

  

 

21

  

(15.9

)%

 

Total

 

35

  

 

32

  

8.1

%

Equities

Cash

 

13

  

 

10

  

20.2

%

 

Derivatives

 

15

  

 

9

  

64.1

%

 

Total

 

27

  

 

20

  

40.5

%

Money Markets

Cash

 

577

  

 

442

  

30.3

%

 

Total

 

577

  

 

442

  

30.3

%

 

Total

$

1,900

  

$

1,366

  

39.1

%

(1)

 Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBIT, Adjusted EBIT margin, Adjusted Net Income, Adjusted Diluted EPS and constant currency change are non-GAAP financial measures. See “Non-GAAP Financial Measures” below and the attached schedules for additional information and reconciliations of such non-GAAP financial measures.

(2)

 Represents net income less net income attributable to non-controlling interests.

DISCUSSION OF RESULTS

Rates – Revenues of $214.1 million in the first quarter of 2024 increased 25.6% compared to prior year period (increased 25.3% on a constant currency basis). Rates ADV was up 44.7% from prior year period, driven by record volume in swaps/swaptions ≥ 1-year and U.S. government bonds. European government bonds reported a record 17.9% ADV increase from prior year period, supported by increased client activity, particularly in UK Gilts, while Mortgages ADV was up 19.9% reflecting increased institutional client activity, as well as record adoption of our specified pool trading platform and record roll trading activity.

Credit – Revenues of $115.8 million in the first quarter of 2024 increased 30.1% compared to prior year period (increased 29.8% on a constant currency basis). Credit ADV was up 8.1% from prior year period, as strong U.S. credit volumes, including record ADV in fully-electronic U.S. High Grade credit, reflected continued client adoption across Tradeweb protocols, including request-for-quote (RFQ), Tradeweb AllTrade® and portfolio trading. Record European credit ADV was up 23.2% from prior year period, driven by strong activity in portfolio trading and Tradeweb Automated Intelligent Execution (AiEX). Our share of fully electronic TRACE for U.S. High Grade was a record 17.6%, up 420 bps from prior year period, and U.S. High Yield was 6.7%, up 60 bps from prior year period.

Equities – Revenues of $27.1 million in the first quarter of 2024 increased 3.2% compared to prior year period (increased 2.8% on a constant currency basis). Equities ADV was up 40.5% from prior year period, driven by record activity in equity convertibles/swaps/options.

Money Markets – Revenues of $16.8 million in the first quarter of 2024 increased 13.4% compared to prior year period (increased 13.1% on a constant currency basis). Money Markets ADV was up 30.3% from prior year period, led by record activity in global repurchase agreements and increased client adoption of Tradeweb’s electronic trading solutions.

Market Data – Revenues of $29.0 million in the first quarter of 2024 increased 29.4% compared to prior year period (increased 28.8% on a constant currency basis). The increase was derived primarily from increased LSEG market data fees from the contract that was amended effective November 1, 2023 and proprietary third party market data revenue.

Other – Revenues of $5.9 million in the first quarter of 2024 decreased 5.4% compared to prior year period (decreased 5.4% on a constant currency basis).

Operating Expenses of $241.1 million in the first quarter of 2024 increased 16.6% compared to $206.7 million in prior year period, primarily due to an increase in employee compensation and benefits including incentive compensation tied to our financial performance, as well as an increase in headcount and related salaries and benefits to support our continued growth.

Adjusted Expenses of $204.2 million in the first quarter of 2024 increased 19.5% (increased 18.3% on a constant currency basis) compared to prior year period primarily due to higher expenses related to employee compensation and benefits. Please see “Non-GAAP Financial Measures” below for additional information.

RECENT HIGHLIGHTS

April 2024

  • Announced definitive agreement to acquire Institutional Cash Distributors (“ICD”), an institutional investment technology provider for corporate treasury organizations trading short-term investments, for $785 million, subject to customary adjustments, which will add Corporates as our fourth client channel alongside Institutional, Wholesale and Retail. The closing of the acquisition is subject to customary closing conditions and regulatory reviews.
  • Awarded two framework agreements to provide Electronic Trading Platforms to the European Central Bank (ECB) and other Eurosystem National Central Banks, after successfully participating in the procurement procedure organized by the ECB.
  • Celebrated our five-year IPO anniversary at Nasdaq’s Opening Bell ceremony.

First Quarter 2024

  • Completed our acquisition of r8fin, a technology provider that specializes in algorithmic-based execution for U.S. Treasuries and interest rate futures.
  • Appointed Lisa Opoku to Tradeweb’s Board of Directors, bringing nearly 30 years of additional finance and legal experience to the Board.
  • Celebrated the grand opening of our Miami and Dubai offices, deepening our relationships with our growing emerging markets client base.
  • Expanded our mortgage platform by adding collateralized mortgage obligations (CMOs) as the latest addition to our securitized product offering.
  • Published our 2023 Annual Report, discussing our 24th consecutive year of revenue growth with record trading volumes, expanded automation capabilities, enhanced strategic partnerships and exciting acquisitions.
  • Recognized in numerous awards celebrating our company, as well as our outstanding and diverse talent, including: Best Financial Services Companies to Work For (U.S. News); Notable Leaders in Finance – Billy Hult (Crain’s New York Business); Women in Technology & Data Awards – Above and Beyond award (vendor) – Susan Bennett (WatersTechnology); Rising Star – Opal Parris (Women’s Bond Club); Notable General Counsel – Doug Friedman (Crain’s New York Business)

CAPITAL MANAGEMENT

  • $1.5 billion in cash and cash equivalents and an undrawn $500 million credit facility at March 31, 2024
  • As consideration for the acquisition of r8fin, we paid $89.2 million in cash and issued 374,601 shares of Class A common stock valued as of the closing date at $36.7 million
  • Cash capital expenditures and capitalization of software development in the first quarter 2024 of $17.3 million (excludes amounts paid at closing for acquisitions)
  • Free cash flow for the trailing twelve months ended March 31, 2024 of $650.8 million, up 8.5% compared to prior year period. See “Non-GAAP Financial Measures” for additional information
  • $785 million acquisition of ICD is expected to close in the second half of 2024, subject to the satisfaction of customary closing conditions and regulatory reviews and the purchase price, subject to customary adjustments, is expected to be funded with cash on hand
  • $239.8 million remained available for repurchase pursuant to the share repurchase program authorization as of March 31, 2024. No shares were repurchased during the first quarter of 2024
  • $43.8 million in shares of Class A common stock were withheld in the first quarter of 2024 to satisfy tax obligations related to the exercise of stock options and vesting of restricted stock units and performance-based restricted stock units held by employees
  • The Board declared a quarterly cash dividend of $0.10 per share of Class A common stock and Class B common stock. The dividend will be payable on June 17, 2024 to stockholders of record as of June 3, 2024

OTHER MATTERS

Updated Full-Year 2024 Guidance*

  • Adjusted Expenses: $755 – 805 million (trending toward top end of range)
  • Acquisition and Refinitiv Transaction related depreciation and amortization expense: $142 million
  • Assumed non-GAAP tax rate: ~ 24.5% – 25.5%
  • Cash costs of non-acquisition capital expenditures and capitalized software development: $75 – 83 million
  • LSEG Market Data Contract Revenue: ~$80 million (~$90 million in 2025)

    *GAAP operating expenses and tax rate guidance are not provided due to the inherent difficulty in quantifying certain amounts due to a variety of factors including the unpredictability in the movement of foreign currency rates. Expense guidance assumes an average 2024 Sterling/US$ foreign exchange rate of 1.24 and includes completed M&A transactions.

CONFERENCE CALL

Tradeweb Markets will hold a conference call to discuss first quarter 2024 results starting at 9:30 AM EDT today, April 25, 2024. A live, audio webcast of the conference call along with related presentation materials will be available at https://investors.tradeweb.com/events-and-presentations.

An archived recording of the call will be available afterward at https://investors.tradeweb.com.

ABOUT TRADEWEB MARKETS

Tradeweb Markets Inc. (Nasdaq: TW) is a leading, global operator of electronic marketplaces for rates, credit, equities and money markets. Founded in 1996, Tradeweb provides access to markets, data and analytics, electronic trading, straight-through-processing and reporting for more than 50 products to clients in the institutional, wholesale and retail markets. Advanced technologies developed by Tradeweb enhance price discovery, order execution and trade workflows while allowing for greater scale and helping to reduce risks in client trading operations. Tradeweb serves more than 2,500 clients in more than 70 countries. On average, Tradeweb facilitated more than $1.5 trillion in notional value traded per day over the past four fiscal quarters. For more information, please go to www.tradeweb.com.

TRADEWEB MARKETS INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)
 

 

 

Three Months Ended

 

 

March 31,

 

 

 

2024

 

 

 

2023

 

Revenues

(dollars in thousands, except per share amounts)

Transaction fees and commissions

 

$

335,451

 

 

$

266,598

 

Subscription fees

 

 

49,681

 

 

 

44,374

 

LSEG market data fees

 

 

20,500

 

 

 

15,594

 

Other

 

 

3,107

 

 

 

2,683

 

Total revenue

 

 

408,739

 

 

 

329,249

 

 

 

 

 

 

Expenses

 

 

 

 

Employee compensation and benefits

 

 

143,087

 

 

 

114,493

 

Depreciation and amortization

 

 

49,337

 

 

 

45,404

 

Technology and communications

 

 

21,310

 

 

 

17,567

 

General and administrative

 

 

10,854

 

 

 

13,920

 

Professional fees

 

 

11,800

 

 

 

11,176

 

Occupancy

 

 

4,673

 

 

 

4,123

 

Total expenses

 

 

241,061

 

 

 

206,683

 

Operating income

 

 

167,678

 

 

 

122,566

 

Interest income

 

 

21,060

 

 

 

12,940

 

Interest expense

 

 

(1,718

)

 

 

(449

)

Other income (loss), net

 

 

—

 

 

 

341

 

Income before taxes

 

 

187,020

 

 

 

135,398

 

Provision for income taxes

 

 

(43,638

)

 

 

(33,205

)

Net income

 

 

143,382

 

 

 

102,193

 

Less: Net income attributable to non-controlling interests

 

 

17,240

 

 

 

14,337

 

Net income attributable to Tradeweb Markets Inc.

 

$

126,142

 

 

$

87,856

 

 

 

 

 

 

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

 

 

 

 

Basic

 

$

0.59

 

 

$

0.42

 

Diluted

 

$

0.59

 

 

$

0.42

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

 

212,709,872

 

 

 

208,105,437

 

Diluted

 

 

214,660,853

 

 

 

210,143,734

 
 

TRADEWEB MARKETS INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
 

 

 

Three Months Ended

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

 

March 31,

 

 

2024

 

 

 

2023

 

 

 

(dollars in thousands)

Net income

 

$

143,382

 

 

$

102,193

 

Merger and acquisition transaction and integration costs (1)

 

 

3,614

 

 

 

585

 

Interest income

 

 

(21,060

)

 

 

(12,940

)

Interest expense

 

 

1,718

 

 

 

449

 

Depreciation and amortization

 

 

49,337

 

 

 

45,404

 

Stock-based compensation expense (2)

 

 

1,183

 

 

 

850

 

Provision for income taxes

 

 

43,638

 

 

 

33,205

 

Foreign exchange (gains) / losses (3)

 

 

(2,284

)

 

 

2,798

 

Tax receivable agreement liability adjustment (4)

 

 

—

 

 

 

—

 

Other (income) loss, net

 

 

—

 

 

 

(341

)

Adjusted EBITDA

 

$

219,528

 

 

$

172,203

 

Less: Depreciation and amortization

 

 

(49,337

)

 

 

(45,404

)

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

 

 

34,367

 

 

 

31,617

 

Adjusted EBIT

 

$

204,558

 

 

$

158,416

 

Net income margin (6)

 

 

35.1

%

 

 

31.0

%

Adjusted EBITDA margin (6)

 

 

53.7

%

 

 

52.3

%

Adjusted EBIT margin (6)

 

 

50.0

%

 

 

48.1

%

(1)

Represents incremental direct costs associated with the acquisition and integration of completed and potential mergers and acquisitions. These costs generally include legal, consulting, advisory, due diligence, severance and other third party costs incurred that directly relate to the acquisition transaction or its integration.

(2)

Represents non-cash stock-based compensation expense associated with the Special Option Award and post-IPO options awarded in 2019 and payroll taxes associated with the exercise of such options.

(3)

Represents unrealized gain or loss recognized on foreign currency forward contracts and foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

(4)

Represents income recognized during the applicable period due to changes in the tax receivable agreement liability recorded in the consolidated statement of financial condition as a result of changes in the mix of earnings, tax legislation and tax rates in various jurisdictions which impacted our tax savings.

(5)

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

(6)

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

 

 

Three Months Ended

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

 

March 31,

 

 

2024

 

 

 

2023

 

 

(dollars in thousands, except per share amounts)

Earnings per diluted share

 

$

0.59

 

 

$

0.42

 

Net income attributable to Tradeweb Markets Inc.

 

$

126,142

 

 

$

87,856

 

Net income attributable to non-controlling interests (1)

 

 

17,240

 

 

 

14,337

 

Net income

 

 

143,382

 

 

 

102,193

 

Provision for income taxes

 

 

43,638

 

 

 

33,205

 

Merger and acquisition transaction and integration costs (2)

 

 

3,614

 

 

 

585

 

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

 

 

34,367

 

 

 

31,617

 

Stock-based compensation expense (4)

 

 

1,183

 

 

 

850

 

Foreign exchange (gains) / losses (5)

 

 

(2,284

)

 

 

2,798

 

Tax receivable agreement liability adjustment (6)

 

 

—

 

 

 

—

 

Other (income) loss, net

 

 

—

 

 

 

(341

)

Adjusted Net Income before income taxes

 

 

223,900

 

 

 

170,907

 

Adjusted income taxes (7)

 

 

(55,975

)

 

 

(41,872

)

Adjusted Net Income

 

$

167,925

 

 

$

129,035

 

Adjusted Diluted EPS (8)

 

$

0.71

 

 

$

0.54

 

(1)

Represents the reallocation of net income attributable to non-controlling interests from the assumed exchange of all outstanding LLC Interests held by non-controlling interests for shares of Class A or Class B common stock.

(2)

Represents incremental direct costs associated with the acquisition and integration of completed and potential mergers and acquisitions. These costs generally include legal, consulting, advisory, due diligence, severance and other third party costs incurred that directly relate to the acquisition transaction or its integration.

(3)

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

(4)

Represents non-cash stock-based compensation expense associated with the Special Option Award and post-IPO options awarded in 2019 and payroll taxes associated with the exercise of such options.

(5)

Represents unrealized gain or loss recognized on foreign currency forward contracts and foreign exchange gain or loss from the revaluation of cash denominated in a different currency than the entity’s functional currency.

(6)

Represents income recognized during the applicable period due to changes in the tax receivable agreement liability recorded in the consolidated statement of financial condition as a result of changes in the mix of earnings, tax legislation and tax rates in various jurisdictions which impacted our tax savings.

(7)

Represents corporate income taxes at an assumed effective tax rate of 25.0% and 24.5% applied to Adjusted Net Income before income taxes for the three months ended March 31, 2024 and 2023, respectively.

(8)

For a summary of the calculation of Adjusted Diluted EPS, see “Reconciliation of Diluted Weighted Average Shares Outstanding to Adjusted Diluted Weighted Average Shares Outstanding and Adjusted Diluted EPS” below.

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

Reconciliation of Diluted Weighted Average Shares Outstanding to Adjusted Diluted Weighted Average Shares Outstanding and Adjusted Diluted EPS

 

Three Months Ended

 

March 31,

 

 

2024

 

 

2023

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

 

 

214,660,853

 

 

210,143,734

Weighted average of other participating securities (1)

 

 

159,957

 

 

291,772

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

 

 

23,077,973

 

 

26,340,754

Adjusted diluted weighted average shares outstanding

 

 

237,898,783

 

 

236,776,260

Adjusted Net Income (in thousands)

 

$

167,925

 

$

129,035

Adjusted Diluted EPS

 

$

0.71

 

$

0.54

(1)

Represents weighted average unvested restricted stock units and unsettled vested performance-based restricted stock units issued to certain retired or terminated employees that are entitled to non-forfeitable dividend equivalent rights and are considered participating securities prior to being issued and outstanding shares of common stock in accordance with the two-class method used for purposes of calculating earnings per share.

(2)

Assumes the full exchange of the weighted average of all outstanding LLC Interests held by non-controlling interests for shares of Class A or Class B common stock, resulting in the elimination of the non-controlling interests and recognition of the net income attributable to non-controlling interests.
 

 

 

Three Months Ended

Reconciliation of Operating Expenses to Adjusted Expenses

 

March 31,

 

 

2024

 

 

 

2023

 

 

 

(dollars in thousands)

Operating expenses

 

$

241,061

 

 

$

206,683

 

Merger and acquisition transaction and integration costs (1)

 

 

(3,614

)

 

 

(585

)

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

 

 

(34,367

)

 

 

(31,617

)

Stock-based compensation expense (3)

 

 

(1,183

)

 

 

(850

)

Foreign exchange gains / (losses) (4)

 

 

2,284

 

 

 

(2,798

)

Adjusted Expenses

 

$

204,181

 

 

$

170,833

(1)

Represents incremental direct costs associated with the acquisition and integration of completed and potential mergers and acquisitions. These costs generally include legal, consulting, advisory, due diligence, severance and other third party costs incurred that directly relate to the acquisition transaction or its integration.

(2)

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

(3)

Represents non-cash stock-based compensation expense associated with the Special Option Award and post-IPO options awarded in 2019 and payroll taxes associated with the exercise of such options.

(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.

Contacts

Investor Relations
Ashley Serrao + 1 646 430 6027

Ashley.Serrao@Tradeweb.com

Media Relations
Daniel Noonan + 1 646 767 4677

Daniel.Noonan@Tradeweb.com

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