Tradeweb Markets Inc.

Good morning, and welcome to TradeWeb's first quarter 2023 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 Head of Treasury, FP&A, and Investor Relations, Ashley Sorrell. Please go ahead.

Thank you, and good morning. Joining me today for the call are our CEO, Billy Hult, 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, non-public information, and complying with our disclosure obligations under 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, presentation, and periodic reports filed with the SEC. In addition, on today's call, we will reference certain non-GAAP measures, as well as certain market and industry data. Information regarding these non-GAAP measures, including reconciliations to GAAP measures, is in our earnings release and presentation. Information regarding market and industry data, including sources, is in our earnings presentation. To recap, this morning we reported GAAP earnings for diluted share of 42 cents. excluding certain non-caste stock-based compensation expense, acquisition-related transaction costs, acquisition and refinance-related DNA, and certain FX items, and assuming an effective tax rate of 24.5%, we reported adjusted net income of a diluted share of $0.54. Please see the earnings release in the Form 10-Q 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, Ashley. Good morning, everyone, and thank you for joining our first quarter earnings call. The market dynamics during the first quarter were chaotic as our clients juggled continued Fed hikes, dramatic moves in the yield curve, the highest level of rate volatility since the global financial crisis, and their own version of fixed income March madness with the regional bank liquidity crisis and resulting market turmoil. Ultimately, the environment led to a mixed bag for our first quarter results. We had some strong days, but also many softer ones, as the extreme volatility and lack of conviction led to clients reducing risk. We also saw some migration, albeit reluctantly, to the phone during moments of high stress in March. The reality is that electronic trading hasn't solved everything yet, and that is our opportunity. This is what we've been solving for and chipping away at for many years by innovating with new protocols, connecting markets, and enhancing available data. Amidst this challenging macro backdrop, our dialogue with our clients remains at exceptionally high levels. We believe that the demand for fixed income products will increase and risk taking will return as central banks enter what is expected to be the final innings of the current rate hike cycle. Turning to slide four, Record first quarter revenues of $329 million were up 5.7% year-on-year on a reported basis. Stripping out 180 basis points of FX headwinds, we generated revenue growth of 7.5% on a constant currency basis. The revenue growth and the resulting scale translated into 13% adjusted EPS growth and improved profitability relative to full year 2022 as our adjusted EBITDA margin increased by approximately 37 basis points to 52.3%. Turning to slide five, the diversity of our growth was on display once again this quarter, marked by record revenues across rates, credit, money markets, and information services. Rates and money markets led the way. accounting for 57% and 18% of our revenue growth, respectively, while credit provided 15% of the growth. Specifically, the rates business was driven by continued growth across global government bonds and swaps. Credit was led by strong U.S. corporate credit and muni trading, while equities was powered by U.S. institutional ETFs. Money markets set a new revenue record fueled by growth in our retail CD franchise and continued organic growth in institutional repos. Finally, information services revenues were driven by proprietary third-party data products, which continue to enjoy robust growth. We believe market data, especially the way it gets incorporated into trade execution to make the search process smarter, is going to become increasingly more important in the future. We also have a great partner in LSAC, to help us distribute our data more broadly. Turning to slide six, 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, revenues increased by 15% year over year, despite industry volumes declining slightly. Interestingly, Industry institutional volumes actually grew 9%, but was more than offset by a 22% pullback in industry wholesale volumes as PTFs reduced risk-taking. Zooming in on TradeWeb, the attractive rate environment continued to propel our retail business while our institutional and wholesale channels grew despite the challenging volatility backdrop. Specifically, first quarter institutional average daily trades rose to record highs up 50% year-over-year, with hedge funds and banks being particularly active. Automation continued to be an important theme, with U.S. Treasury AIX average daily trades increasing by more than 100% year-over-year. Turning to our wholesale business, our legacy streaming offering and our session business outperformed, while our claw business underperformed the industry, as elevated volatility benefited the incumbents. Last month, we achieved the final technology milestone with respect to the integration of the NFI acquisition as we successfully completed the migration of our matching engine to a strategically located data center. The team continues to focus on improving liquidity pool on the club by onboarding new clients and enhancing our overall offering. Stepping back, we think our blend of different customers and protocols and track record of innovation gives us a lot of optionality to continue to lead the evolution of U.S. Treasury electronic trading. Within equities, our decision many years ago to invest in our ETF business continues to pay dividends. Our institutional business, particularly in the U.S., continued to grow and add clients during the quarter despite slower industry volumes. With ETFs, especially fixed income funds, playing an increasingly important role in portfolio management, our value proposition has never been stronger. Other initiatives to expand our equity brand beyond our flagship ETF franchise are also bearing fruit, with momentum continuing in equity options, convertibles, and ADRs. Moreover, our recent launch of INAV calculations for ETFs in Europe with immediate adoption by BlackRock is another example of how we collaboratively innovate with our clients as we strive to improve the ETF ecosystem. Looking ahead, the client pipeline remains strong as the benefits of our electronic solutions continue to resonate. We believe we are well positioned to capitalize on the secular ETF growth, not just in equities, but across our fixed income business. Turning to slide seven, as I think about one of the next chapters of TradeWeb, building our international presence beyond Europe is a key strategic priority. Areas of focus include APAC and EM. In that vein, yesterday, we were excited to announce our intent to acquire YieldBroker, a leading Australian government bond and interest rate derivatives trading platform covering the institutional, wholesale, and primary markets. We believe this potential acquisition would allow TradeWeb to further expand our client base and grow our Asia Pacific footprint. On the client front, This would deepen our penetration into the hedge fund dealers and asset management communities. We are particularly excited that this acquisition would let us offer Australian superannuation funds, the world's fifth largest holder of pension assets, a seamless platform for domestic and international over-the-counter trading. Financially, we believe there are meaningful synergies and also an opportunity to cross-sell our products upon integration of our platforms. The potential deal remains subject to yield broker stockholder approval, final definitive documentation, and would be subject to customary closing conditions and regulatory reviews. The other dimension of our international expansion is our effort to build a substantial EM business. Looking back, many years ago we decided to really invest and build out our European presence by launching new European products and cross-selling existing products to European traders. Today, we are one of the leading platforms for fixed income in Europe with a deep dealer and client network. We believe that the formula for EM is remarkably similar. To this end, we recently appointed our first head of emerging markets, and we have already gotten to work expanding our product offering and network. The reality is that despite all the success we've had as a company, we have a great opportunity to leverage our product offering to also develop a strong EM brand. With a rapidly growing addressable market in excess of $1 billion and lower levels of electronification, we believe that the broader EM opportunity is substantial. We will be focused on both EM rates and credit, and we believe our ability to provide clients with the ability to trade both developed and emerging market instruments on one platform will be a differentiator. With respect to EM credit, the competitive dynamic is very similar to U.S. credit when we entered several years ago. We believe the market needs and wants competition. We are focused on complementing our first forays into EM through interest rate swaps and rates and portfolio trading and credit with a complete product set. Our interest rate swaps offering complements our local currency bond roadmap. providing local dealers with the opportunity to provide liquidity in local currency bonds and hedge rate risk in developed markets. We are currently investing in the team and technology, adding currencies, and onboarding dealers and clients. An early differentiator is our collaboration with FX All, which we expect will go live in the coming months. We believe we have a promising pipeline of innovations and enhancements which should help further digitize voice workflows for our clients. This will be a multi-year initiative, and we look forward to reporting on our progress in the coming quarters. With that, I will turn it over to Tom to talk about another promising growth initiative in munis and provide our usual updates on corporate credit and interest rate swaps.