Tradeweb Reports Third 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 September 30, 2024.

$448.9 million quarterly revenues, an increase of 36.7% (36.5% on a constant currency basis) compared to prior year period

$2.2 trillion average daily volume ("ADV") for the quarter, an increase of 55.3% compared to prior year period; quarterly ADV records in U.S. government bonds, fully electronic U.S. high yield credit, credit derivatives and global repurchase agreements

$130.2 million net income and $179.3 million adjusted net income for the quarter, increases of 16.7% and 37.1% respectively from prior year period

53.4% adjusted EBITDA margin and $239.8 million adjusted EBITDA for the quarter, compared to 51.9% and $170.4 million respectively for prior year period

$0.53 diluted earnings per share ("Diluted EPS") and $0.75 adjusted diluted earnings per share for the quarter

$0.10 per share quarterly cash dividend declared; $25.0 million of shares repurchased

Billy Hult, CEO of Tradeweb:

"We are pleased to report record quarterly revenues of $448.9 million, reflecting a 36.7% increase year-over-year. This strong growth was driven by record average daily volume (ADV) of $2.2 trillion, up 55% compared to the same period last year. We achieved quarterly ADV records across rates, credit, and money markets, highlighting the success of our organic expansion efforts and the contributions from our recent acquisitions of ICD, r8fin, and Yieldbroker, which have strengthened our global business.

Throughout the quarter, we worked closely with clients as they navigated a remarkable period of macroeconomic uncertainty and rates volatility. In Asia, we expanded our geographic presence into India with the appointment of a new country head. We also reinforced our global commitment to advancing ESG initiatives with the publication of our fourth annual Corporate Sustainability Report. Credit markets reached an important milestone in September, as electronic trading for the month accounted for 50% of total U.S. high grade TRACE volume for the first time.

Looking ahead, we remain focused on identifying strategic growth opportunities and further expanding our presence across key markets."

DISCUSSION OF RESULTS

Rates – Revenues of $233.1 million in the third quarter of 2024 increased 34.9% compared to prior year period (increased 34.7% on a constant currency basis). Rates ADV was up 52.1% from prior year period, driven by record ADV in U.S. government bonds as well as strong year-over-year growth in mortgages and swaps/swaptions ≥ and < 1-year. The addition of r8fin continued to contribute to wholesale volumes. European government bonds ADV was up 15.3% from prior year period, led by strong growth in UK Gilts. Mortgages ADV was up 27.3% from prior year period, reflecting record specified pool volumes as well as record to-be-announced ("TBA") volumes, which was led by record roll trading activity.

Credit – Revenues of $118.3 million in the third quarter of 2024 increased 31.4% compared to prior year period (increased 31.3% on a constant currency basis). Credit ADV was up 42.3% from prior year period, driven by record activity in credit derivatives and strong U.S. credit volumes, including record ADV in fully-electronic U.S. high yield credit. U.S. credit ADV was up 37.0% from prior year period, reflecting continued client adoption across Tradeweb products and protocols, including request-for-quote ("RFQ"), Tradeweb AllTrade® and portfolio trading. European credit ADV was up 12.0% from prior year period, driven by strong activity across a wide range of protocols. We reported 17.7% share of fully electronic U.S. high grade TRACE, up 109 bps from prior year period, and a 7.8% share of fully electronic U.S. high yield TRACE, down 3 bps from prior year period.

Equities – Revenues of $25.5 million in the third quarter of 2024 increased 22.1% compared to prior year period (increased 22.0% on a constant currency basis). Equities ADV was up 20.5% from prior year period, driven by strong institutional ETF platform activity and higher trading volumes in European ETFs and equity derivative products.

Money Markets – Revenues of $36.1 million in the third quarter of 2024 increased 129.2% compared to prior year period (increased 128.2% on a constant currency basis). Money Markets ADV was up 62.5% from prior year period, driven by contributions from the August 1, 2024 acquisition of ICD, record activity in global repurchase agreements and increased client adoption of Tradeweb's electronic trading solutions.

Market Data – Revenues of $29.8 million in the third quarter of 2024 increased 29.6% compared to prior year period (increased 29.2% 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 $6.1 million in the third quarter of 2024 increased 4.0% compared to prior year period (increased 4.0% on a constant currency basis).

Operating Expenses of $289.6 million in the third quarter of 2024 increased 42.2% compared to $203.6 million in prior year period, primarily due to an increase in employee compensation and benefits, including incentive compensation expense tied to our financial performance, as well as an increase in headcount and related salaries, bonus and benefits associated with our continued growth, including the August 1, 2024 ICD Acquisition. During the quarter, we also incurred $2.4 million in accelerated stock-based compensation expense in connection with the departure of an executive effective September 30, 2024 and $1.4 million in compensation expense related to the acceleration of vesting of previously unvested stock awards issued by the ICD seller.

Adjusted Expenses of $225.0 million in the third quarter of 2024 increased 30.4% (increased 31.5% on a constant currency basis) compared to prior year period primarily due to higher expenses related to adjusted employee compensation and benefits. Please see "Non-GAAP Financial Measures" below for additional information.

RECENT HIGHLIGHTS

October 2024

• FTSE Russell to incorporate a price source change to include Tradeweb FTSE benchmark closing prices for U.S Treasuries, European Government Bonds and UK Gilts in FTSE's global fixed income indices, including its premiere World Government Bond Index (WGBI).
• Commemorated the 10-year anniversary of the launch of our U.S. Credit Platform.
• Recognized as Multi-Asset Trading System of the Year - Asia Pacific Awards (FOW) and 100 Women in European Finance - Nawel Khelil (Financial News)

Third Quarter 2024

• Announced the addition of Daniel Maguire to Tradeweb's Board of Directors, effective as of September 18, 2024.
• Appointed Maxlin Thomas as Head of India as part of our efforts to further strengthen our global presence.
• Completed Tradeweb's acquisition of Institutional Cash Distributors ("ICD"), an investment technology provider for corporate treasury organizations trading short-term investments, adding corporates as a fourth client channel, alongside our existing focus on institutional, wholesale and retail clients.
• Published our fourth annual Corporate Sustainability Report and our second annual standalone Task Force on Climate-Related Financial Disclosure (TCFD) Report.
• Executed the first fully-automated European Government Bond Basis trade, in collaboration with Eurex, with Nomura providing liquidity to Nykredit Bank.
• In June 2024, we signed a 16-year lease for our new NYC headquarters, which is expected to commence in July 2025. Including expected double rent from our existing NYC office and other anticipated leasing activity in the second half of 2025, we expect our second half 2025 occupancy expenses to be approximately $7 million higher than the second half of 2024.
• Recognized in numerous awards celebrating our company, as well as our outstanding and diverse talent, including: Best Company - Markets Choice Awards (Markets Media); Best Sustainable Companies to Own (Morningstar); Most Influential in European Finance - Enrico Bruni (Financial News); Rising Star - Allie Hunt (Women in Financial Markets); European Women in Finance Awards - Excellence in Trading Platforms - Alessandra Stagliano (Markets Media)

CAPITAL MANAGEMENT

• $1.2 billion in cash and cash equivalents and an undrawn $500 million credit facility at September 30, 2024
• As purchase consideration for the August 1, 2024 acquisition of ICD, we paid $771.2 million in net cash and also issued 41,705 shares of restricted Class A common stock in connection with the acquisition
• Free cash flow for the trailing twelve months ended September 30, 2024 of $797.4 million, up 23.6% compared to prior year period. See "Non-GAAP Financial Measures" for additional information
• Cash capital expenditures and capitalized software development in the third quarter 2024 of $17.0 million (excludes amounts paid at closing for acquisitions)
• During the third quarter of 2024, as part of its share repurchase program, Tradeweb purchased 214,795 shares of Class A common stock, at an average price of $116.41, for purchases totaling $25.0 million. $214.8 million remained available for repurchase pursuant to the share repurchase program authorization as of September 30, 2024
• $2.1 million in shares of Class A common stock were withheld in the third 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 December 16, 2024 to stockholders of record as of December 2, 2024

OTHER MATTERS

Updated Full-Year 2024 Guidance*

• Adjusted Expenses: $855 - 875 million (trending toward middle of range)
• Acquisition and Refinitiv Transaction related depreciation and amortization expense: $158 million
• Assumed non-GAAP tax rate: ~ 24.5% - 25.5%
• Cash capital expenditures and capitalized software development: ~ $77 - 85 million
• LSEG Market Data Contract Revenue: ~$80 million (~$90 million in 2025)

The guidance has been revised to reflect higher adjusted expenses in light of strong business momentum. Depreciation and amortization, assumed non-GAAP tax rate, expenditures and LSEG Market Data Contract Revenue guidance is unchanged from the prior quarter guidance.

*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. Guidance amounts for cash capital expenditures and capitalized software development excludes amounts paid at closing for acquisitions.

CONFERENCE CALL

Tradeweb Markets will hold a conference call to discuss third quarter 2024 results starting at 9:30 AM EDT today, October 30, 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/8fmfndxv/
• To join the call via phone, please register in advance here: https://register.vevent.com/register/BI7f65d6e977a04267a4a86c5cf7eef76f. 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 2,800 clients in more than 70 countries. On average, Tradeweb facilitated more than $1.9 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 principal assets consist of its direct and indirect 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 and nine months ended September 30, 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 and completed 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241028544767/en/