Tradeweb Reports Fourth Quarter and Full Year 2020 Financial Results

Rhea-AI Summary

Tradeweb Markets reported strong financial results for Q4 2020, with gross revenues of $233.1 million, an 18.1% increase year-over-year. The full year saw gross revenue rise by 15.1% to $892.7 million. Noteworthy highlights include record average daily volume (ADV) of $897.9 billion for Q4, up 30.9% year-over-year, and a net income increase of 26.2% to $218.4 million for 2020. The company declared a quarterly cash dividend of $0.08 per share and initiated a $150 million share repurchase program.

Positive

• Q4 gross revenues of $233.1 million, up 18.1% YoY.
• Record ADV of $897.9 billion in Q4, up 30.9% YoY.
• Net income increased 26.2% to $218.4 million for the full year.
• Adjusted EBITDA margin improved to 49.2% in Q4.
• Quarterly cash dividend of $0.08 declared.
• $150 million share repurchase program initiated.

Negative

• Operating expenses rose 13.0% to $161.5 million in Q4.

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 and full year ended December 31, 2020.

$233.1 million quarterly gross revenues increased 18.1% (15.9% on a constant currency basis) year over year. Full Year 2020 gross revenue increase of 15.1% vs Full Year 2019

$897.9 billion record average daily volume (“ADV”) for the quarter, an increase of 30.9% year over year with ADV records in U.S. High Yield bonds, Chinese bonds and Repos. Quarterly records for TRACE market share in U.S. High Grade and U.S. High Yield bonds

$66.4 million net income and $80.5 million adjusted net income for the quarter, increases of 16.0%, and 33.1% respectively from the prior year period

49.2% adjusted EBITDA margin or $114.6 million adjusted EBITDA for the quarter, compared to 46.9% or $92.4 million respectively for the prior year period

$0.28 diluted earnings per share (“Diluted EPS”) for the quarter and $0.34 adjusted diluted earnings per share

$0.08 per share quarterly cash dividend declared and $150 million share repurchase program launched

Lee Olesky, CEO of Tradeweb Markets:

“Strong financial results for the fourth quarter capped off a transformative year for Tradeweb. We reported record average daily volumes for Q4 thanks to broad-based momentum across asset classes. Wherever our clients were working in 2020, we know that electronic trading, digital processing and data helped them navigate unprecedented debt issuance and market volatility. Our markets are evolving, and with 2021 volumes off to a strong start we are excited about the role electronic trading continues to play in that evolution."

SELECT FINANCIAL RESULTS	4Q20			4Q19			Change			Constant Currency Growth(1)
(dollars in thousands except per share amounts)(Unaudited)
GAAP Financial Measures
Gross revenue	$	233,076		$	197,308		18.1		%	15.9	%
Rates	$	121,699		$	107,539		13.2		%	10.8	%
Credit	$	59,255		$	43,542		36.1		%	33.9	%
Equities	$	15,011		$	11,665		28.7		%	23.8	%
Money Markets	$	10,382		$	10,027		3.5		%	2.1	%
Market Data	$	20,864		$	19,361		7.8		%	7.3	%
Other	$	5,865		$	5,174		13.4		%	13.4	%
Net income	$	66,449		$	57,278		16.0		%
Net Income attributable to Tradeweb Markets Inc.(2)	$	55,060		$	41,329		33.2		%
Diluted EPS	$	0.28		$	0.25		12.0		%
Non-GAAP Financial Measures
Adjusted EBITDA (1)	$	114,576		$	92,441		23.9		%	20.0	%
Adjusted EBITDA margin (1)	49.2		%	46.9		%	231		bps	167	bps
Adjusted EBIT (1)	$	103,563		$	81,482		27.1		%	22.7	%
Adjusted EBIT margin (1)	44.4		%	41.3		%	314		bps	242	bps
Adjusted Net Income (1)	$	80,483		$	60,489		33.1		%	28.4	%
Adjusted Diluted EPS (1)	$	0.34		$	0.26		30.8		%	26.9	%

(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.

ADV (US $bn) (Unaudited)
Asset Class	Product	4Q20		4Q19		YoY
Rates	Cash	328		268		22.5	%
	Derivatives	209		184		14.1	%
	Total	537		451		19.1	%
Credit	Cash	8		6		38.5	%
	Derivatives	10		7		32.8	%
	Total	18		13		35.4	%
Money Markets	Cash	330		212		55.6	%
	Total	330		212		55.6	%
Equities	Cash	7		5		50.1	%
	Derivatives	6		4		25.4	%
	Total	12		9		37.9	%
	Total	898		686		30.9	%

DISCUSSION OF RESULTS: FOURTH QUARTER 2020

Rates – Revenues from rates of $121.7 million in the fourth quarter of 2020 increased 13.2% compared to the fourth quarter of 2019 (10.8% on a constant currency basis). ADV in rates of $537.3 billion for the fourth quarter of 2020 increased 19.1% compared with the fourth quarter of 2019. Government bond trading increased due in part to growth in execution via firm streams and new client acquisition, along with higher global issuances and volatility around COVID-19, the U.S. election and Brexit. Low mortgage rates drove mortgage origination and higher secondary trading volumes, while macro uncertainty contributed to higher volumes in rates derivatives.

Credit – Revenues from credit of $59.3 million in the fourth quarter of 2020 increased 36.1% compared to the fourth quarter of 2019 (33.9% on a constant currency basis) as continued growth in portfolio trading and anonymous all-to-all trading protocols helped Tradeweb capture quarterly record TRACE market share in U.S. High Grade and U.S. High Yield bonds, with fully electronic representing the majority of each. Quarterly ADV in credit of $17.9 billion for the fourth quarter increased 35.4% over the prior year period with records in U.S. High Yield, U.S. High Grade-Fully Electronic and Chinese bonds.

Money Markets – Revenues from money markets of $10.4 million in the fourth quarter of 2020 increased 3.5% compared to the fourth quarter of 2019 (2.1% on a constant currency basis). Record quarterly ADV in money markets of $330.3 billion increased 55.6% driven in part by the addition of new dealers and participants on our global institutional Repo platform.

Equities – Revenues from equities of $15.0 million in the fourth quarter of 2020 increased 28.7% compared to the fourth quarter of 2019 (23.8% on a constant currency basis). ADV in equities of $12.4 billion for the fourth quarter of 2020 increased 37.9% as global ETF trading benefited from sharp fluctuations in equity markets and continued new client adoption.

Market Data – Revenues from market data of $20.9 million in the fourth quarter of 2020 increased 7.8% compared to the fourth quarter of 2019 (7.3% on a constant currency basis) due to delivery of additional data under our market data license agreements with Refinitiv.

Other – Other revenues of $5.9 million in the fourth quarter of 2020 increased 13.4% compared to the fourth quarter of 2019 (13.4% on a constant currency basis).

Operating Expenses – Operating expenses of $161.5 million in the fourth quarter of 2020 increased 13.0% compared to the fourth quarter of 2019 due to higher employee compensation and benefits expense, as well as higher depreciation and amortization expense. Adjusted Expenses were $129.5 million in the fourth quarter of 2020, an increase of 11.8% from the prior year period, primarily due to higher employee compensation and benefits expense associated with performance-related compensation and higher headcount, as well as higher technology and communications expense. Please see "Non-GAAP Financial Measures" below for additional information.

DISCUSSION OF RESULTS: FULL YEAR 2020

Tradeweb recorded its 21st consecutive year of record revenues in 2020. Gross revenue increased 15.1% (14.5% on a constant currency basis), to $892.7 million, compared to full year 2019, driven by record volumes across all of our asset classes and capped off by a record fourth quarter. Net income increased 26.2% to $218.4 million for the year ended December 31, 2020, compared to $173.0 million for the year ended December 31, 2019. Adjusted EBITDA margin increased to 48.9% for the year ended December 31, 2020 compared to 45.5% for the year ended December 31, 2019, representing an increase of 336 basis points (285 bps on a constant currency basis). Diluted EPS was $0.88 for the year ended December 31, 2020. Adjusted Diluted EPS was $1.31 for the year ended December 31, 2020.

CAPITAL MANAGEMENT

• $791.3 million in cash and cash equivalents and an undrawn $500 million credit facility at December 31, 2020.
• Capital expenditures and capitalization of software development: $42.5 million.
• Free cash flow for the year ended December 31, 2020 of $400.7 million up 50.3%. See “Non-GAAP Financial Measures” for additional information.
• 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, payable on March 15, 2021 to stockholders of record as of March 1, 2021.
• The Board also authorized a $150 million share repurchase program. The amounts and timing of the repurchases will be subject to, among other factors, general market conditions and the prevailing price and trading volumes of our Class A common stock. The repurchase program, which is authorized through the end of 2023, does not require the Company to acquire a specific number of shares and may be suspended, amended or discontinued at any time.
  

OTHER MATTERS

Full-Year 2021 Guidance*

• Adjusted Expenses: $530 - $560 million
  • Non-GAAP adjusted expense guidance does not include any expenses tied to our recently announced acquisition of Nasdaq’s U.S. fixed income electronic trading platform. We will update our guidance following the closing of the deal.
• Acquisition and Refinitiv Transaction related depreciation and amortization expense: $120 million
• Assumed non-GAAP tax rate: 22.0%
• Capital expenditures and capitalization of software development: $45 - $50 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 fourth quarter 2020 results starting at 9:25 AM EST today, February 4, 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 6190256. 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 $835 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
	Quarter Ended December 31,										Year Ended December 31,
	2020					2019					2020					2019
Revenues		(unaudited)					(unaudited)					(unaudited)
Transaction fees	$	134,922				$	104,245				$	518,474				$	423,583
Subscription fees		36,652					34,333					142,358					138,731
Commissions		42,913					41,165					163,114					149,365
Refinitiv market data fees		16,240					15,383					59,706					55,635
Other		2,349					2,182					9,007					8,252
Gross revenue		233,076					197,308					892,659					775,566
Expenses
Employee compensation and benefits		86,305					76,545					349,658					329,457
Depreciation and amortization		39,837					36,402					153,789					139,330
Technology and communications		13,103					10,199					47,500					39,285
General and administrative		10,302					8,999					34,822					34,960
Professional fees		7,967					7,048					28,875					28,029
Occupancy		3,982					3,786					14,660					14,686
Total expenses		161,496					142,979					629,304					585,747
Operating income		71,580					54,329					263,355					189,819
Tax receivable agreement liability adjustment		11,425					33,134					11,425					33,134
Net interest income (expense)

FAQ

What were Tradeweb Markets' Q4 2020 revenue figures?

Tradeweb reported gross revenues of $233.1 million for Q4 2020.

How did Tradeweb's average daily volume perform in Q4 2020?

Tradeweb achieved a record average daily volume of $897.9 billion in Q4 2020, an increase of 30.9% year-over-year.

What was the net income for Tradeweb in 2020?

Tradeweb's net income increased to $218.4 million for the full year 2020.

What is the adjusted EBITDA margin for Tradeweb in Q4 2020?

The adjusted EBITDA margin for Tradeweb in Q4 2020 was 49.2%.

Did Tradeweb Markets declare any dividends?

Yes, Tradeweb declared a quarterly cash dividend of $0.08 per share.

What is the share repurchase program announced by Tradeweb?

Tradeweb initiated a $150 million share repurchase program.