Tradeweb Markets Inc. ($TW)

Good afternoon, everyone. Why don't we go ahead and get started? My name is Jeff Schmitt. I cover wealth management and capital market stocks at William Blair. I would like to introduce Tradeweb. This is their first time at our conference. We're excited to have them. They're the largest electronic fixed income trading platform in the market with just a great growth profile. And we're pleased to have with us the CEO, Billy Hult, to discuss the business. Thank you, Billy. And again, before we start, just go to williamblair.com for a full list of disclosures. So with that, I will hand it over to Billy.

Amazing. Thank you so much. Very nice. everyone. Good afternoon. I'll get the most quick sort of like awkward piece of this presentation out of the way. I'm from New York, so I'm like a huge [ Knicks ] fan. So if you guys see me like running out of here, like catch the flight so I can watch the game, that's why. So really excited to be here. I've been at the company for 25 years. I became CEO 4.5 years ago, President of the company since 2008. From my perspective, I see my job kind of like two ways. I go into the office every day and I say to myself, like what's the #1 problem the company is facing today, try to roll up my sleeves and get involved and engaged in that problem. And then I'm extremely fortunate I think, because I get to as CEO, kind of like tell the story of who we are, what we do all of the time to amazing investors and amazing people. So I'm a very kind of fortunate person to be able to do that. Tradeweb is a technology company, first and foremost, but we're a technology company that, from my perspective, I think, like just lives and breathes in the financial markets. And I think that's been the one thing that has differentiated us from the very beginning. We live and breathe in the financial markets. And from my perspective, I think we are at a really sweet spot in terms of the company and the business that we are in. And so when I think about what a sweet spot means, I think it means a few things. And let me start by saying it this way, like obviously, like debt markets, private and public debt markets continue to rise. Private sector intermediation is back in vogue. The legacy banks because of this moment of deregulation, the legacy banks, the partner banks of Tradeweb are doing exceptionally well in the markets that we kind of live and breathe in. That's a really good thing. And then as I describe all of that, I think something like exceptionally important is also happening, which is the nonbank liquidity providers, the firms like Citadel and the firms like Jain Street are [ chaning ] into our world. And they're not [ chaning ] into our world with any kind of conflict of like how business gets done. I wish things would go back in the past. I wish technology would go away. I wish I could just get back on the phone and talk to my clients like a regular person, like, oh, no, we are going after market share through technology. And I think Tradeweb, given kind of how we've built markets, how we've partnered with our clients kind of sits in the catbird seat as these firms continue to accelerate into our world. So a really, really kind of interesting moment for us as a company. When I look at our business and when I think about what Tradeweb does, I really think about it in a very kind of simplified way. So let me describe it for you. Scale, we had over $2 billion in revenue last year for the first time. That's a big moment for us as a company. Growth through a bunch of different kind of market environments, market cycles, you guys know this really well. We've had continued kind of mid-teen growth, really strong growth through a bunch of kind of different moments in time over the past bunch of years. So growth. And then obviously, something very, very important, which is profitability. So while we've been kind of creating scale, kind of creating growth and creating profitability, we've been expanding our margins as we've done it. So really, really good. And Sameer, you're doing something very interesting, which is you're changing the slides as I'm speaking. So go back for a second, don't rush me. Scale growth and profitability, like major, like really big things. So let me just kind of say this very quickly, Sameer, and then I can nod at you, and you can do this muscle by the way going blind. It's okay. Over the past 12 months, we've generated over $2.2 billion in revenue. I said that, trading roughly $2.8 trillion daily, okay? 15,000 trades a day across something very important, which I want to say this very clearly, 50-plus products, four asset classes, rates, credit, money market and equities. We serve over 30,000 clients across 85-plus countries, okay? The biggest asset managers in the world, the biggest macro hedge funds in the world, we are that like really interesting piece of real estate that sits between those clients and their biggest liquidity providers, the Goldman Sachs, the Morgan Stanley, the JPMorgan, the Citis of the world. I always kind of say this, I think this is really important. Like we have really important clients that are in our network. And I think we go out of our way to treat our clients really well. But we're also aware of something I think that's really important, which is like they're not more important clients to us than they are to the biggest banks in the world. So we kind of know where we stand like in the totem pole of the world, and we try to approach things that way. Can you flip the slide, please, my friend? Thank you. So I say something like that I believe in, and I kind of write this down all the time, like live and breathe with our clients. The goal has been, from my perspective, like quite simple, be that one-stop shop for how they trade. Technology is going to drive more convergence, being that one-stop shop is incredibly important. And so as we've been able to do all of that, I think we have quite a straightforward and pretty easy-to-understand business model. We earn revenues by charging our clients to trade on our platform. That's how we make money. And we have good revenue visibility given that roughly 23% of our revenue is fixed and the remaining 77% is variable and levered to volume growth in a great environment and a great business. Slide 4 for a second. Thank you. I say this all the time. The market is dynamic. Obviously, it's changing all the time. Comfort zones and the way we think about comfort, there's no growth around comfort zones, right? So we're constantly understanding how do we push ourselves forward, how do we maintain our eye on preserving what we think of as leadership roles in legacy markets, at the same time, levering this big network into new opportunities. Momentum, as everybody here knows really well, continues to build momentum, and we feel that very strongly as our company. So our constant focus is on giving our buy-side clients and dealers more time, a more cost-efficient way of trading. This has allowed us to compound revenue at roughly 16.5% annually from 2016 through 2025, while doing something that I said was very important earlier, which is expanding those margins over 1,525 basis points. Maintain your leadership position in the markets that you're in, do not take your eye "off the ball", but continue to invest in new opportunities, build out and grow your business and still expand margins. That's a very interesting juggling act that I think as a company, we've been quite good at. One of the reasons that we've been, I think, good at it is that our international business, our international revenue has been an absolute standout for us. So we've compounded at roughly 25% annually. We expect our international growth to remain a key feature of our story. We don't have a kind of London satellite office that we stop by to and say hello to people at. It is a driver -- a thought driver of our business and one of the most important things that we've done as a company is really build out this international business. I'll say this one, hopefully, cleanly, so you don't kick me on the way home, Sameer. After producing a top 10 revenue month in April, we followed that up by putting up nearly 15% average daily revenue growth in May, okay? That's a very, very important kind of comment that I want to make sure. I say properly, our international business shining again, producing nearly 18% year-over-year average daily revenue growth. Slide 5. Thank you. If you are too focused on the past, and sometimes I do get focused on the past because I'm very, very proud of what we've been able to accomplish here as a company. Too focused on the past, too myopic and sort of overly worried about the present moment in time to make an obvious point, and you guys know this really well, I think you risk missing the future. And the future for us is how we define ourselves as a company. Looking ahead, when you think about the long-term story, there are probably three things that I want to make sure I leave you guys with. One is really large total addressable market, right? So our TAM is huge. I mean, like $12.6 trillion of average daily volume, I feel like I'm in like -- not to say like gating myself like Austin Power is kind of a huge number of stuff. And we're only about essentially 24% of that market today, right? Voice trading, the old way of doing business, it's 2026. There are markets that we are in, businesses that we are in that still sometimes have components of kind of like 1996, right? And the reason why kind of voice business still occurs today is that large trades, market-moving trades, big risk-oriented trades still tend to get done on the phone and complexity negotiation, those types of trades still get done the phone, right? And so for us, the huge focus is on how do we migrate that phone business to electronic business. How do we get large trades broken down into more bite-size digestible trades efficiently processed through the market and how do we solve for negotiation and complexity. So it's not just about the markets that are growing. Our clients are deepening their engagement with us across all of these products. Since 2015, I'm becoming like very good at stats as I'm reading, the number of clients that are active in three or more products is up nearly 300%, okay? That's a real leverage for us as a network. And those trading five or more clients and 10 or more clients have each grown over 175%. That's again, like clear evidence that as clients do more with us, this concept of one-stop shopping gets stickier and our wallet share tends to grow. And that's how we kind of think about the business, I think, in a really important way. Slide 6. We're already there. Thank you. These next 2 slides, I think, give a pretty good detail around how we think about focus as a company, U.S. treasuries, global swaps on Slide 6. We're going to get to credit in a second. We continue to attract new clients, deepen our wallet share, driving higher engagement with both existing and new products. So the market goes like electronic, no one's happy about it, but these things happen in the world. I have a fair amount of enemies at Goldman, JPMorgan, Morgan Stanley. We can talk about all of that at some other time. Market goes electronic, that is truly when the innovation of that market like begins. So there can be a sort of like default, I think, belief that once the market goes electronic, that's kind of like the end of innovation. It's actually the beginning, right? So I said something I think that is truly important, which is we are a technology company, but we are a technology company that really kind of lives and breathes in the markets. When you live and breathe in it, you can understand that there are multiple cadences, multiple ways of doing business. So Tradeweb, to make an obvious point, kind of lives and breathes in what we think about as like the RFQ space, the ability for BlackRock or PIMCO, large asset manager, central bank, big hedge fund to ask JPMorgan, Goldman Sachs, Morgan Stanley, Citadel for a quick price. That is one way of doing business. but it's by no means the only way of doing business. The other ways of doing business can be different types of how we think about micro trading protocols. So the ability to ask one dealer for a large-sized trade to make a 2-sided market. I'm not going to tell you directionally which way I'm going, you provide me back a 2-sided market. If the bid-ask is within a certain increment, I will do the trade, okay? It sounds kind of like wonky, a little bit technical. Figuring out these cadences is a massively important thing to do because the other thing that I said, I think, is also really true, which is we have these amazing clients, but they're not more important clients to us than they are to JPMorgan, Goldman Sachs, Morgan Stanley, et cetera. So when you're living and breathing in this kind of trading world trading environment and you're creating electronification, transparency, all of these good things, you better get the rules of the road, the rules of engagement the right way. And so that's an example of how the market kind of continues to innovate. The other way I would just describe sort of a version of that integration is everything that I've so far described and so far, we've been able to kind of talk about a little bit sort of revolves around the concept of the buy side being proactive in the market, looking to do a trade and ultimately, the dealer community reacting to it, okay? Buy side is proactive, dealers react with liquidity. And then to make an obvious point, because there are a bunch of successful companies that have kind of lived and breathed in that interaction, that's important. But it's not the only type of cadence that exists in the market. The other types of cadence that exists in the market that still have so much room to solve for -- and solve around is the concept of, A, the dealers being proactive to their most important clients through either inventory or trading access; and B, the concept of how we think about reverse axis, which is I'm a big, big important large client, and I have something of such size to do that I'm not just looking for general liquidity in the marketplace. I'm looking for a natural buyer or a natural seller in the business to respond back to. So I'm describing those stories because I want to leave the impression that there's so much more interesting things for us to accomplish and so many different interesting types of cadence and protocols to continue to develop. It's quite exciting. Slide 7. We went public like a bunch of years ago now. And we were a rate company. And I think there was -- from my perspective, and I'd like to joke around, but I'll say this like in a serious way, I think there's a lot of respect around what we had accomplished, but we were really like a rates company. I think there were open questions from the investor world, whether or not we have the right stuff to really figure out credit. There was this feeling almost like if you're a rates company, you're a rates company, if you're a credit company, you're a credit company, the markets are really different, hard to figure them both out. We had grown up as a company from day 1 kind of competing with Big Bad Bloomberg. So we understood the concept of competition like really early on. And we had felt like the incumbent in credit had not had a free run because they earned it, but we didn't feel like they had that kind of competitive force in the market that clients obviously tend to like. When companies compete like clients win kind of thing. And so from our perspective, I think creating a viable credit trading platform as a public company has probably been one of the best things that we've done. And as we've done that, we've really done that in a couple of different ways, one of which was figuring out what we do pretty well and then incorporating that into our credit strategy. So as everybody here knows very well, like the credit market trades on spread. As the leading government bond platform, we figured out a way to bring a government bond price into a credit trade. That was a differentiator for us. It added a lot of value to our clients. It doesn't seem that complicated. Actually building it was kind of complicated. And then the second thing that we wound up doing was saying like banks are fundamentally important in trading. And we are not fully supportive or fully engaged in the concept of ultimately dis-intermediating the banks from their clients. So this concept of like all-to-all trading, two buy-side clients kind of meeting out there in the clouds and exchanging liquidity, we didn't feel that was the most straightforward way of actually doing business. So we went out of our way to bring the banks back into credit trading, and we did that through building out very interesting protocols, one of which we call and we talk about this a lot, maybe too much, we call portfolio trading. Big bid list, big offer list. I'm going to synthesize these lists into one all-in price and create liquidity off of one price. It's done quite well for us. So the credit story has been a good one, continuing to evolve. Almost every time I'm on our earnings call, as you know very well, almost every question is about like where is your high-yield market share, where is your [ IG ] market share. The investor world tends to gravitate towards credit very specifically. We are extremely focused on our credit business, and we feel like we're in the best position to continue to gain market share there, both against the [ phone ], our biggest competitor, the [ phone ] and also in the competitive landscape as well. Slide 8. We never get to talk about our ETF business. But our ETF business has absolutely kind of crushed it. The way I kind of think about it is way back in the day when Tradeweb was this kind of rates platform, and we were looking for expansion, we were trying to figure out how to expand but not take our eye off the ball, do that kind of balancing act. We were in the kind of government bond market, the mortgage market, the European markets, all these rates markets. And for us, like the swaps market was this big adjacent market. Company [ MarketAxess ] did also an excellent job because they were in the credit markets. They were also looking to expand. And so they obviously kind of identified the emerging markets business as their natural extension into something different and interesting and did quite well doing that. ETFs were kind of like jump all, quite honestly, like we all kind of understood what they were, but neither company had a natural advantage towards getting into that market. I think our -- maybe not surprisingly, our relationship with BlackRock kind of helped us become kind of like the flagship venue for ETFs. I think we were starting to understand how big the ETF market could get. And we've built out and we've grown a really impressive and really strong ETF business. If you guys were going to ask me like what's one of the sort of more important things that you wound up getting that's harder to see around this ETF business, I would say, not surprisingly, it created kind of access for us to the most kind of sophisticated players in the ecosystem. I had mentioned to you all that like the nonbank liquidity providers, the Citadels, the [ Jain ] Streets, those types of firms are chaning into our markets. We got access to them not surprisingly because they play such a large role in the create and redeem process in ETFs. And I think that's given us a huge advantage as they continue to Korean into the more broad-based institutional markets. So lots of good stuff happening with ETFs. Thanks, Sameer. I gave everyone kind of in an international business, a lot of props, not that anyone from trade even remotely looking at this, but that's okay. The EM revenue is a big deal, right? Because from our perspective, it was sort of twofold. We saw what [ MarketAxess ] did in EM. We were appreciative and respectful of that. We're still very big proponents of the market likes competition. And then not surprisingly, we were a little bit like let's stick with what we're good at. Let's figure out our first foray into EM, which was EM swaps, EM rates. We've done really, really well with that. Big opportunity for Tradeweb to continue to accelerate and push forward in that EM credit world, showing this sort of like playbook that we've built out in credit, which is bring the banks in, add value into the trade process and then in a really, really important way, figure out protocols that add value to clients. We're going to run that playbook pretty hard in the kind of EM credit world for sure. So first sort of -- I think like a little bit of the first kind of journey around what we've been trying to do, and I think hopefully been able to do well has been around kind of what I was describing before, which is this like first step of how do we get people to stop using the phone and to start using the electronic way of doing business, phone to the mouse, to the keyboard. This next phase to make an obvious point, is going to be off of the mouse, off of the keyboard, off of the terminal into how we think about ultimately a smarter search or more algorithmic search for liquidity in the market. A bunch of years ago, I think we went down the path of probably the most important thing that we've done as a company, which is embrace the concept that clients will look for liquidity away from just logging into Tradeweb or logging into Bloomberg or logging into any system, understand that clients are getting more sophisticated. They're looking to consolidate liquidity more easily and more quickly. Your liquidity is your gold mind and help and work with clients as they search for and find liquidity in the market. And as I described all that, that is the early evolution of how we think about Tradeweb, our AiEX product, which has been a significant differentiator for us Data around this is everything. The smart search for liquidity around this is everything. I remember like very early on going to visit great clients, and they were not just great clients because I like them. They were great clients because they use Tradeweb and they understood Tradeweb and they thought about what we were doing was really important. And I would sit behind them and I would watch them do trades because there's probably no substitute actually for seeing how clients engage with your platform. And I would see how they would like send out a ticket on Tradeweb for like mortgages or government bonds or swaps, and it would be like sort of like Bank of America, Citi, Deutsche Bank, Goldman. And I would, not surprisingly, just out of curiosity, like ask like why did you pick those four banks because you have like 10 banks to peg or 15 banks to bet and they'd like oh, just like tickets like alphabetical like A, C, D, G. And there's massive evolution and massive change from that random walk of liquidity. So as we think about where this all is going, it's going to be smarter search. I'm no longer guessing where liquidity is in the market. I know where the liquidity is in the market. And I'm going to find that through the most trusted data, the most trusted liquidity source, the platform that actually understands how to use -- how to run the rules of the road the best way and the most -- the way with the most integrity. And I think that has been probably the most important thing that we've done, embrace where the future is going, not just around AI and machine learning, but around the concept that the entree into these marketplaces is not going to be through what's my log-in number, where is my mouse and where is the keyboard. It's shifting very quickly in interesting ways around that. I said we're killing it there. That's okay. So you see the sort of like the Tradeweb story. I'm excited about it. I would say from my perspective, it's very simple, maintain our leadership role in these markets that we've built, understand that technology is going to continue to drive multi-asset class trading. We're in a really good position there. We certainly don't rest easy on that, figure out this concept of large trades, complexity, all of those things that exist in our day-to-day businesses. And to make an obvious point, the world is changing fast, right? So be front-footed on this continued development around AiEX, around machine learning. At the same time, we are proactively making partnership investments around tokenization, around blockchain, around predictive markets. We're probably doing the things that you would expect us to do as a very ambitious company around where is the future going and how do we make sure we continue to position ourselves in the best way around that. So that's been a real strong priority for us, maintaining our position, maintaining our leadership strength in core business and making the right kind of bets around how we think about around frontier markets. We've been extremely fortunate as a company, not just to have such great clients, but to have, from my perspective, really strong kind of partnership relationships with these clients, firms like Goldman, firms like JPMorgan, firms like BlackRock, extremely well run and great firms. In an interesting way, I said Citadel and Jain Street, they're fundamentally important. They're not like partners, right? They're not like out of central casting partners. They don't really like whiteboard with you. But as we've kind of built stuff up with them, created a little bit of credibility, we're getting into like the whiteboard moments. And so I'm able to sit down with the firms like Citadel or Jain and say, like what's the evolution of macro products going to look like in the next couple of years? How do we think about Tradeweb getting access to allowing its clients to have access to gold pricing, silver pricing, [ MA7 ] stocks. Obviously, we're having the kind of conversations you would expect us to around can the crypto markets really evolve into institutional markets? Can the predictive markets really evolve into institutional markets. So really, really interesting kind of fun time for our business. We're a focused kind of hard-working company. We're aware of the moment. We're aware of, I think, change continuing to come. I think making sure that you continue to sort of build out presences as a public company can be more difficult, but we are really bringing the kind of rigor that you would expect us to those kind of decisions and feeling quite good about the opportunity in front of us. So I appreciate everyone's time, and thank you very much. Thank you.