01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
Tradeweb Markets Inc. (Nasdaq: TW) reported gross revenue of $892.7 milliona for 2020, up 15.1% from $775.6 million in 2019, driven mainly by higher trading volumes that lifted transaction fees by $94.9 million and commissions by $13.7 million.
Operating income rose 38.7% to $263.4 millionb, and net income attributable to Tradeweb Markets Inc. was $166.3 million, compared with $83.8 million in 2019. Adjusted EBITDA reached $436.4 million, a 48.9% margin, and Free Cash Flow was $400.7 million. Average daily volume across all asset classes rose 15.5% to $838.0 billion, with money markets and rates the largest contributors.
The company is controlled by Refinitiv, which holds approximately 88.1%c of combined voting power. The LSEG Transaction, an all-share acquisition of Refinitiv by London Stock Exchange Group plc, closed on January 29, 2021, and the filing states that Tradeweb remains a standalone public company with no expected change to Refinitiv's voting control in the near term. Rates generated 56% of gross revenue.
The Tax Receivable Agreement liability stood at $404.3 milliond at year-end, and the Revolving Credit Facility of $500.0 million was undrawn. Subsequent events include a definitive agreement to acquire Nasdaq's U.S. fixed income electronic trading platform for $190 million in cash, a new $150.0 million share repurchase program through fiscal 2023, and a quarterly dividend of $0.08 per share. The company also faces pending antitrust litigation related to U.S. Treasuries and interest rate swaps, for which no contingency reserves have been recorded.
02—Key points
Key Highlights
- Gross revenue grew 15.1% to $892.7 million in 2020, led by transaction fees of $518.5 million (up 22.4%) and commissions of $163.1 million (up 9.2%).
- Operating income increased 38.7% to $263.4 million, and net income attributable to Tradeweb Markets Inc. rose 98.5% to $166.3 million.
- Adjusted EBITDA was $436.4 million, a 48.9% margin, and Free Cash Flow was $400.7 million, up from $266.5 million in 2019.
- Average daily volume increased 15.5% to $838.0 billion, with credit ADV up 49.5% and equities ADV up 57.6%.
- Refinitiv controls approximately 88.1% of combined voting power, and the LSEG Transaction closed January 29, 2021 without expected change to Tradeweb's stockholder voting rights.
- Subsequent events include an agreement to acquire Nasdaq's U.S. fixed income platform for $190 million in cash and a new $150.0 million share repurchase authorization.
- Tax Receivable Agreement liability rose to $404.3 million, and the $500.0 million Revolving Credit Facility was undrawn at year-end.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $892.66M$775.57M | +15.1% |
| Operating Expenses | $629.30M$585.75M | +7.4% |
| Operating Income | $263.36M$189.82M | +38.7% |
| Net Income | $166.30M$83.77M | +98.5% |
| EPS (Basic) | $0.92$0.57 | +61.4% |
| EPS (Diluted) | $0.88$0.54 | +63.0% |
| Shares Outstanding (Basic) | 180.41M148.01M | +21.9% |
| Shares Outstanding (Diluted) | 188.22M156.54M | +20.2% |
05—Questions
Frequently Asked Questions
What drove Tradeweb's revenue growth in 2020?
The filing attributes the increase in gross revenue to higher trading volumes, which produced a $94.9 million increase in transaction fees and a $13.7 million increase in commissions. Institutional revenue rose 22.3% to $554.3 million, and Credit revenue rose 31.1%.
Who controls Tradeweb and what changed with the LSEG Transaction?
Refinitiv holds approximately 88.1% of the combined voting power and is therefore a controlled company under Nasdaq rules. LSEG acquired Refinitiv in an all-share transaction that closed January 29, 2021. The filing states Tradeweb remains a standalone public company and does not expect the transaction to change stockholder voting rights in the near term.
What are Tradeweb's main capital allocation priorities?
The company paid quarterly dividends of $0.08 per share totaling $58.1 million in 2020 and declared another $0.08 dividend in February 2021. It also authorized a share repurchase program of up to $150 million through fiscal 2023, primarily to offset annual dilution from stock-based compensation, and has a $190 million all-cash acquisition of Nasdaq's U.S. fixed income platform pending.
What are the main legal and financial risks disclosed?
Tradeweb faces putative antitrust class actions relating to U.S. Treasuries auctions and interest rate swaps, for which it has recorded no contingency reserves. Its TRA liability of $404.3 million is substantially payable over 15 years, and its dependence on dealer clients who are also stockholders represented 45.1% of 2020 revenues from pre-IPO Bank Stockholders and affiliates.
06—Continue