Tradeweb Reports Second Quarter 2023 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, 2023.


$310.6 million quarterly revenues, an increase of 4.5% (4.4% on a constant currency basis) compared to prior year period


$1.3 trillion average daily volume (“ADV”) for the quarter, an increase of 10.2% compared to prior year period; quarterly ADV records in global repurchase agreements and equity convertibles/swaps/options, and a record 14.9% share of fully electronic U.S. High Grade TRACE


$101.9 million net income and $123.7 million adjusted net income for the quarter, increases of 24.9% and 10.8% respectively from prior year period


52.5% adjusted EBITDA margin and $163.1 million adjusted EBITDA for the quarter, compared to 52.4% and $155.6 million respectively for prior year period


$0.42 diluted earnings per share (“Diluted EPS”) for the quarter and $0.52 adjusted diluted earnings per share


$0.09 per share quarterly cash dividend declared; $7.6 million of shares repurchased


Billy Hult, CEO of Tradeweb:


“Market conditions steadily improved during the second quarter, with our business performing well against a backdrop of mixed markets. We produced double-digit revenue growth across global government bonds, U.S. and European Credit, equity derivatives, and money markets. In Credit, we captured a record 16.0% share of fully-electronic U.S. High Grade TRACE for the month of June and a record 14.9% for the quarter. It was not long ago that our share of U.S. High Grade was in the single digits, and we remain confident in our ability to realize continued market share growth. More broadly, one theme playing a huge role across all of our markets is automation. Average daily trades through our AiEX automation tool grew by 90% in Treasuries and 70% in Credit this quarter compared with prior year period. In Market Data, we continue to evolve our Ai-Price bond-pricing engine with new innovations such as this quarter’s launch of benchmark closing prices for European government bonds with FTSE Russell.”

	SELECT FINANCIAL RESULTS		2Q23			2Q22		Change		Constant Currency Change(1)
	(dollars in thousands except per share amounts)(Unaudited)
	GAAP Financial Measures
	Total revenue	$	310,613		$	297,138		4.5	%	4.4	%
	Rates	$	160,354		$	151,586		5.8	%	5.6	%
	Credit	$	84,048		$	83,991		0.1	%	0.1	%
	Equities	$	22,146		$	22,659		(2.3	)%	(2.9	)%
	Money Markets	$	15,834		$	12,166		30.1	%	30.0	%
	Market Data	$	22,776		$	21,030		8.3	%	8.2	%
	Other	$	5,455		$	5,706		(4.4	)%	(4.4	)%
	Net income	$	101,939		$	81,600		24.9	%
	Net income attributable to Tradeweb Markets Inc. (2)	$	89,082		$	68,344		30.3	%
	Diluted EPS	$	0.42		$	0.33		27.3	%
	Net income margin		32.8	%		27.5	%	+536	bps
	Non-GAAP Financial Measures
	Adjusted EBITDA (1)	$	163,055		$	155,621		4.8	%	4.9	%
	Adjusted EBITDA margin (1)		52.5	%		52.4	%	+12	bps	+27	bps
	Adjusted EBIT (1)	$	148,797		$	142,612		4.3	%	4.5	%
	Adjusted EBIT margin (1)		47.9	%		48.0	%	-9	bps	+5	bps
	Adjusted Net Income (1)	$	123,749		$	111,659		10.8	%	11.1	%
	Adjusted Diluted EPS (1)	$	0.52		$	0.47		10.6	%	10.6	%

(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.

	ADV (US $bn) (Unaudited)
	Asset Class	Product		2Q23		2Q22	YoY
	Rates	Cash	$	345	$	341	1.0	%
		Derivatives		429		368	16.8	%
		Total		774		709	9.2	%
	Credit	Cash		11		10	4.2	%
		Derivatives		8		16	(49.3	)%
		Total		19		27	(28.8	)%
	Equities	Cash		10		10	(0.3	)%
		Derivatives		9		7	39.7	%
		Total		19		17	15.9	%
	Money Markets	Cash		484		424	14.2	%
		Total		484		424	14.2	%
		Total	$	1,297	$	1,176	10.2	%

DISCUSSION OF RESULTS


Rates – Revenues of $160.4 million in the second quarter of 2023 increased 5.8% compared to prior year period (5.6% increase on a constant currency basis). Rates ADV was up 9.2% from prior year period, driven by strong volumes in swaps/swaptions ≥ 1-year led in part by heightened trading in shorter dated instruments and 42% increase in compression and LIBOR-transition related activity as compared to prior year period. U.S. and European government bond volumes were supported by sustained rates market volatility.


Credit – Revenues of $84.0 million in the second quarter of 2023 increased 0.1% compared to prior year period (the same percentage increase on a constant currency basis). Credit ADV was down 28.8% from prior year period, as lower credit derivatives volumes reflected an overall decline in broader swap execution facility (SEF) market activity. Our share of fully electronic TRACE for U.S. High Grade was a record 14.9%, up 200 bps compared with prior year period, while U.S. High Yield was 6.2%, same as prior year period.


Equities – Revenues of $22.1 million in the second quarter of 2023 decreased 2.3% compared to prior year period (2.9% decrease on a constant currency basis). Equities ADV was up 15.9% from prior year period and we reported record ADV in equity convertibles/swaps/options in the quarter. U.S. ETF growth was driven by strong wholesale activity, while institutional client engagement remained robust. European ETF volumes reflected declining overall market volumes.


Money Markets – Revenues of $15.8 million in the second quarter of 2023 increased 30.1% compared to prior year period (30.0% increase on a constant currency basis), driven by growth in our retail CDs and continued organic growth in institutional repurchase agreements. Money Markets ADV was up 14.2% from prior year period, led by record activity in global repurchase agreements and continued client adoption of Tradeweb's electronic trading solutions.


Market Data – Revenues of $22.8 million in the second quarter of 2023 increased 8.3% compared to prior year period (8.2% increase on a constant currency basis). The increase was derived primarily from increased proprietary third party market data revenue.


Other – Revenues of $5.5 million in the second quarter of 2023 decreased 4.4% compared to prior year period (the same percentage decrease on a constant currency basis).


Operating Expenses of $194.3 million in the second quarter of 2023 increased 2.0% compared to $190.5 million in prior year period due to higher general and administrative expenses, higher technology and communications expenses and higher professional fee expenses. These increases were partially offset by a decrease in expenses related to employee compensation and benefits, primarily due to decreases in incentive compensation.


Adjusted Expenses of $161.8 million increased 4.7% (4.3% increase on a constant currency basis) compared to prior year period due to higher technology and communications expenses, higher general and administrative expenses and higher depreciation and amortization. Please see "Non-GAAP Financial Measures" below for additional information.


RECENT HIGHLIGHTS


Second Quarter 2023

• 
  
  Tradeweb agreed to acquire Yieldbroker, a leading Australian trading platform for Australian and New Zealand government bonds and interest rate derivatives covering the institutional, wholesale, and primary markets, subject to customary closing conditions and regulatory approvals
  
  
• 
  
  Tradeweb jointly announced a collaboration with Euroclear and Informa Global Markets to automate the security identification and setup process for soon-to-be issued syndicated Eurobonds in the primary market
  
  
• 
  
  Tradeweb facilitated its first transactions on Swap Connect, China’s new electronic trading channel for CNY interest rate swaps (IRS). Tradeweb is currently the only international electronic trading platform that supports both request-for-quote (RFQ) and click-to-trade (CTT) execution protocols on Swap Connect
  
  
• 
  
  Tradeweb, Bloomberg and MarketAxess entered into a joint venture agreement to establish an independent company for the purpose of participating in the public procurement procedure to become the fixed income consolidated tape provider in the European Union, all subject to relevant regulatory approvals
  
  
• 
  
  Tradeweb collaborated with FTSE Russell to launch benchmark closing prices for European government bonds
  
  
• 
  
  Tradeweb was recognized in numerous awards celebrating our company, including: Portfolio Awards, Best Web Video (Financial Communications Society), Portfolio Awards, Best Digital Collateral (Financial Communications Society), Portfolio Awards, Best Organic Social Media (Financial Communications Society), Inside Market Data & Inside Reference Data Awards, Best Real-Time Market Data Initiative (WatersTechnology), Excellence in Trading & Tech Awards, Best Fixed Income Trading Platform (Financial News), Excellence in Trading & Tech Awards and Best OTC Trading Platform (Financial News)
  
  
• 
  
  Jacques Aigrain succeeded Lee Olesky as Chair of the Board of Directors (the "Board") effective July 1, 2023. Mr. Olesky retired from the Board at the end of the second quarter of 2023.
  
  
• 
  
  Catherine Johnson was elected to the Board at the 2023 Annual Meeting held on May 15, 2023. In addition, each of current directors Troy Dixon, Scott Ganeles and Murray Roos was elected to serve another term on the Board at the 2023 Annual Meeting
  
  

CAPITAL MANAGEMENT

• 
  
  $1.4 billion in cash and cash equivalents and an undrawn $500 million credit facility at June 30, 2023
  
  
• 
  
  Cash capital expenditures and capitalization of software development in the second quarter 2023: $15.0 million
  
  
• 
  
  Free cash flow for the trailing twelve months ended June 30, 2023 of $634.8 million, up 17.9% compared to prior year period. See “Non-GAAP Financial Measures” for additional information
  
  
• 
  
  During the second quarter of 2023, as part of its share repurchase program, Tradeweb purchased 107,365 shares of Class A common stock, at an average price of $70.81, for purchases totaling $7.6 million. As of June 30, 2023, a total of $244.7 million remained available for repurchase pursuant to the share repurchase program
  
  
• 
  
  $1.9 million in shares of Class A common stock were withheld in the second quarter of 2023 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 $0.09 per share of Class A common stock and Class B common stock. The dividend will be payable on September 15, 2023 to stockholders of record as of September 1, 2023
  
  

OTHER MATTERS


Unchanged Full-Year 2023 Guidance*

• 
  
  Adjusted Expenses: $669 - 714 million
  
  
• 
  
  Acquisition and Refinitiv Transaction related depreciation and amortization expense: $127 million
  
  
• 
  
  Assumed non-GAAP tax rate: ~24% - 25%
  
  
• 
  
  Cash costs of capital expenditures and capitalized software development: $56 - 62 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. Current guidance is not reflective of any impact as a result of the pending 2023 Yieldbroker acquisition.

CONFERENCE CALL


Tradeweb Markets will hold a conference call to discuss second quarter 2023 results starting at 9:30 AM EDT today, July 27, 2023. 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/hfxjvxw7
  
  
• 
  
  To join the call via phone, please register in advance here: [url="]https://register.vevent.com/register/BIfc63e47c64dc4781a0582131daf2e918 [/url]
  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 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 $1.2 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
	Dollars in Thousands, Except Per Share Data
			Three Months Ended								Six Months Ended
			June 30,								June 30,
				2023				2022				2023				2022
	Revenues		(unaudited)				(unaudited)				(unaudited)				(unaudited)
	Transaction fees and commissions		$	246,461			$	237,669			$	513,059			$	489,474
	Subscription fees			45,748				41,540				90,122				82,995
	Refinitiv market data fees			15,461				15,426				31,055				30,984
	Other			2,943				2,503				5,626				5,171
	Total revenue			310,613				297,138				639,862				608,624
	Expenses
	Employee compensation and benefits			103,924				109,890				218,417				227,881
	Depreciation and amortization			45,887				44,770				91,291				89,220
	Technology and communications			18,701				16,034