Tradeweb Markets Inc.

Good morning, and welcome to TradeWeb's fourth quarter 2022 earnings conference call. As a reminder, today's call is being recorded and will be available for playback. To begin, I'll turn the call over to Director of Investor Relations, Samir Murakutla. Please go ahead.

Thank you, and good morning. Joining me today for the call are our CEO, Billy Holt, who will review the highlights for the quarter and provide a brief business update. our President, Tom Pluta, who will dive a little deeper into some growth initiatives, and our CFO, Sarah Ferber, who will review our financial results. We intend to use the website as a means of disclosing material nonpublic information and complying with disclosure obligations under SEC Regulation FD. I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations. and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements related to, among other things, our guidance are forward-looking statements. Actual results may differ materially from these forward-looking statements. Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our earnings release and presentation and periodic reports filed with the SEC. In addition, on today's call, we will reference certain non-GAAP measures. Information regarding these non-GAAP measures, including reconciliations to GAAP measures, are in our posted earnings release and presentation. To recap, this morning we reported GAAP earnings for diluted share of 42 cents. Excluding certain non-cash stock-based compensation expense, acquisition-related transaction costs, acquisition and refinances related depreciation and amortization, and certain FX items, and assuming an effective tax rate of 22%, we reported adjusted net income per diluted share of 49 cents. Please see the earnings release and the Form 10-K to be filed with the SEC for additional information regarding the presentation of our historical results. Now, let me turn the call over to Billy.

Thanks, Samir. Good morning, everyone, and thank you for joining our fourth quarter 2022 earnings call. Before I start, I'd like to congratulate our colleague, Ashley Sorau, on the birth of his daughter, and we're excited for his return post his paternity leave. As I kick off my inaugural earnings call as CEO, I want to celebrate the past and the amazing journey that the team is taking to get where we are now. Since joining the firm almost 23 years ago, I've had an exciting front row seat to helping the team grow an innovative startup into a global business that generated nearly $1.2 billion in revenues in 2022, marking our 23rd straight year of record revenues. Brainstorming challenges and pushing the envelope on the next innovation has been truly rewarding. Our success has been a function of hard work, some luck along the way, and an unwavering core approach. creating great feedback loops by listening to our clients and then collaborating with them to make their lives easier across market environments. Despite all the success we've had to date, I believe the best is yet to come. Our competitive advantage combines our people who are the heartbeat of our success, our expanding network and pioneering technology. We believe these three elements will continue to propel our business to new heights in coming years. We believe our multi-asset, multi-protocol, multi-sector, and global business really differentiates us from our electronic peers and positions us well to capitalize on the secular shift of phone and chat-based execution to electronic mediums. As I highlighted last quarter, the entire organization recently galvanized around crafting our three-year plan and the excitement from the teams across products and geographies was undeniable. From product to sales, finance to technology, the singular focus remains providing all our clients with an increasingly better user experience across the trade lifecycle. Serial innovation will continue to be our North Star. We're also excited by the current state of the fixed income markets. The attractive yield environment is resonating with our retail and institutional clients and bodes well for actively and passively managed fixed income. As we look to the future, we are truly excited about the team we have assembled. We're thrilled to have Tom Pluta, who officially transitioned to his president role at the beginning of the year, and we believe he will be a valuable addition as we look to grow TradeWeb's footprint over the coming years. However, our deep bench of talent goes beyond just Tom and Sarah, and I believe our entire executive and operating management teams and rising stars are primed to drive our future growth. Turning to slide four, fourth quarter revenues of 293 million were up 5.8% year over year on a reported basis. Stripping out the 350 basis points of FX headwinds that continued to be severe, we generated revenue growth of 9.3% on a constant currency basis. The revenue growth and the resulting scale translated into 17% adjusted EPS growth and improved profitability relative to full year 2021 as our adjusted EBITDA margin increased by approximately 200 basis points to 52.8%. Turning to slide five, the diversity of our growth was on display once again this quarter. While rates faced a more challenging growth environment, credit and equities led the way, accounting for 61% and 29% of our fourth quarter revenue growth. Specifically, rates revenues were down 1% as growth across global government bonds was offset by a more risk-off swaps and sluggish mortgage environment. Credit posted another strong quarter driven by strong meanies and U.S. corporate credit trading. Equities posted its highest fourth quarter revenues ever driven by institutional ETFs and our efforts to diversify and grow our other equity products. Money markets set a new record fueled by growth in our retail CD franchise and continued organic growth in institutional repos. Finally, market data revenue growth was equally split across our Refinitiv contract and our proprietary data products, which continued to enjoy robust growth. Turning to slide six, our fourth quarter capped off a record year in 2022. Record volumes across all asset classes translated into 10.4% and 14% revenue growth on a reported and constant currency basis, respectively. The scale generated by our strong top line results drove approximately 111 basis points of adjusted EBITDA margin expansion and 16% adjusted earnings growth. And as our growth initiatives continue to scale, we maintained our tradition of consistent and focused organic investment. 2022 was a very busy year with many accomplishments to highlight. Broadly, they can be summed up as enhancing our existing capabilities, adding new clients, and forging new partnerships. On the capability front, we made significant headway in integrating our NASDAQ fixed income acquisition, bolstering our EM offering in rates and credit with new currencies, and adding new collateral types in repo. On the client side, Specific highlights include the scaling of our credit platform to record levels as clients continue to embrace our RFQ portfolio trading and all trade protocols. A similar story unfolds in equities and U.S. Treasury streaming as an expanding client base made 2022 another record year. Finally, we collaborated with S&P Global across European credit to integrate with their digital primary markets platform. Perhaps most importantly, in December, we announced our credit partnership with BlackRock's Aladdin. This collaboration is a testament to the progress we have made in credit and should help our global credit business. We believe our investments have not only positioned us well for the future, but also helped make 2022 another banner year for TradeWeb. Moving to slide seven, 2022 continued the streak of robust revenue growth that we have worked hard to deliver for multiple years now. Specifically, 2022 showcased our portfolio of asset classes and regions that allowed us to consistently help our clients navigate a variety of macro environments and drive growth. Today, while the majority of our revenues still comes from rates, Most of our growth actually comes from our other businesses. Credit and equities were highlights, accounting for 35% and 20% of our revenue growth in 2022. Regionally, we continue to see strong growth in our international business, which has grown revenues at an average of 19% since 2016, with 2022 growth of 15% on a constant currency basis. Our international revenues are currently anchored by our European business. Looking ahead, we believe Asia Pacific and more broadly emerging markets will continue to become a larger component of our international growth story over the next few years. We believe we have room to grow our network as we expand our client footprint across domestic markets, expand our protocol offering and cross sell our leading products into fast growing domestic markets. Relentless innovation has been critical to our success. Throughout our history, we have prioritized being first to market, which requires constant investment. In the last seven years, we have invested over $500 million in technology to help shape the future of electronic markets, growing those investments at an average of 14% since 2016. As our investments bear fruit, adjusted EBITDA margins have expanded nicely. Looking ahead, we expect 2023 to be another investment year. While our investments remain heavily concentrated in rates and credit, we are optimistic about the long-term durability of our growth across the business, given our market share gains and pipeline of innovations. Moving on to slide eight, I will provide a brief update on two of our main focus areas, U.S. Treasuries and ETFs, and turn it over to Tom to dig deeper into U.S. credit and global interest rate swaps. Starting with U.S. Treasuries, record market share of 20% drove a 10% year-over-year increase in our revenues. The underlying dynamics were mixed. The higher interest rates fueled acceleration of our retail business was accompanied by a challenging environment across our institutional and wholesale client channels. Institutional clients trimmed the risk and traded in smaller trade lots given the heightened volatility. Despite this challenging backdrop, institutional activity on the platform remained healthy with fourth quarter institutional average daily trades rising to record highs, up 60% year over year. Other important leading indicators of the institutional business remained strong. We maintained share versus Bloomberg and client engagement continues to grow as the number of users trading in the fourth quarter increased by 6% year over year. Moving on to the wholesale channel, overall industry volumes were down 9% year over year. Our legacy streaming offering outperformed with volumes on par with the fourth quarter 2021, while our CLOB underperformed as elevated volatility benefited the incumbent. As I highlighted earlier, We completed the clearing migration and the broker-dealer consolidation in 2022, and we look forward to the migration of the data centers in the first half of 2023. After we migrate the data centers, we believe that this will be a catalyst for revenue growth as we rebuild the liquidity pool and enhance our protocol offering based on client needs. Stepping back, we believe our unique position in the market where we cater to all client channels offer a full suite of protocols and a dynamic technology stack puts us in a leadership position to respond to and drive healthy market structure change. Finally, within equities, clients continue to recognize the utility of ETFs as an easily tradable tool to obtain exposure to a broad range of asset classes and benchmark indices. In many cases, the ETFs could be more liquid than the underlying securities they hold. The reduction of manual touchpoints and automation of ETF trading continues to enable our clients to be more efficient and nimble. The liquidity in ETFs combined with client-specific customized solutions have made it possible to transfer large amounts of risk with reduced manual interventions. Our efforts to lead with innovation resulted in another quarter of strong institutional revenue growth with average daily volume of 31% year over year, driven by new client wins and strong industry volumes. Our other initiatives to expand beyond our flagship ETF franchise are also bearing fruit with momentum continuing in equity options, convertibles, and ADRs. Institutional equity Derivative revenues were up over 10% year over year in the fourth quarter. Looking ahead, the client pipeline remains strong as the benefits of our electronic solutions continue to resonate. We're excited about the potential for the business after this record year, and we believe we remain well positioned to benefit from the secular growth ETFs and our other growth initiatives scaling. And with that, I will turn it over to Tom.