Tradeweb Reports First Quarter 2024 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 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."

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.

• To join the call via audio webcast, click here: https://edge.media-server.com/mmc/p/t9m7w485
• To join the call via phone, please register in advance here: https://register.vevent.com/register/BIf70b5059ccc842ed91c32442e68f0355. Registered participants will receive an email confirmation with a unique PIN to access the conference call.

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.

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

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

BASIS OF PRESENTATION

Tradeweb Markets Inc. (unless the context otherwise requires, together with its subsidiaries, referred to as "we," "our," "Tradeweb," "Tradeweb Markets" or the "Company") closed its IPO on April 8, 2019. As a result of certain reorganization transactions (the "Reorganization Transactions") completed in connection with the IPO, on April 4, 2019, Tradeweb Markets Inc. became a holding company whose only material assets consist of its equity interest in Tradeweb Markets LLC ("TWM LLC") and related deferred tax assets. As the sole manager of TWM LLC, Tradeweb Markets Inc. operates and controls all of the business and affairs of TWM LLC and, through TWM LLC and its subsidiaries, conducts its business. As a result of this control, and because Tradeweb Markets Inc. has a substantial financial interest in TWM LLC, Tradeweb Markets Inc. consolidates the financial results of TWM LLC and its subsidiaries.

Numerical figures included in this release have been subject to rounding adjustments and as a result totals may not be the arithmetic aggregation of the amounts that precede them and figures expressed as percentages may not total 100%.

Please refer to the Company's previously filed Quarterly Reports on Form 10-Q and Annual Report on Form 10-K for capitalized terms not otherwise defined herein.

UNAUDITED INTERIM RESULTS

The interim financial results presented herein for the three months ended March 31, 2024 and 2023 are unaudited. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

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 2024 guidance and full-year 2024 and 2025 revenue guidance related to the LSEG market data license agreement, pending acquisitions, future performance, the industry and markets in which we operate, our expectations, beliefs, plans, strategies, objectives, prospects and assumptions and future events are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed under the heading "Risk Factors" in the 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 events or performance and future events, 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 future events, 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 events, 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.

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 Net Income per diluted share ("Adjusted Diluted EPS"), Adjusted Expenses, Free Cash Flow and constant currency change, which are supplemental financial measures that are not calculated and 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.

We present certain changes 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 change, which is a non-GAAP financial measure, is defined as change excluding the effects of foreign currency fluctuations. Constant currency information is calculated by translating the current period and prior period's results using the annual average exchange rates for the prior period. We use constant currency change as a supplemental metric to evaluate our underlying performance between periods by removing the impact of foreign currency fluctuations. We present certain constant currency change 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.

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

MARKET AND INDUSTRY DATA

This release includes estimates regarding market and industry data that we prepared based on our management's knowledge and experience in the markets in which we operate, together with information obtained from various sources, including publicly available information, industry reports and publications, surveys, our clients, trade and business organizations and other contacts in the markets in which we operate. In presenting this information, we have made certain assumptions that we believe to be reasonable based on such data and other similar sources and on our knowledge of, and our experience to date in, the markets in which we operate. While such information is believed to be reliable for the purposes used herein, no representations are made as to the accuracy or completeness thereof and we take no responsibility for such information.

TRADEWEB SOCIAL MEDIA

Investors and others should note that Tradeweb announces material financial and operational information using its investor relations website, press releases, SEC filings and public conference calls and webcasts. Information about Tradeweb, 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 X (formerly 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 to monitor these social media channels in addition to following our investor relations website, press releases, SEC filings and public conference calls and webcasts. These social media channels may be updated from time to time on our investor relations website.

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