Tradeweb Markets - Q4 2025

Transcript

Operator (participant)

Good morning, and welcome to Tradeweb's fourth quarter 2025 earnings conference call. As a reminder, today's call is being recorded and will be available for playback. To begin, I will turn the call over to Head of Treasury, FP&A, and Investor Relations Ashley Serrao. Please go ahead.

Ashley Serrao (Head of Treasury, FP&A, and Investor Relations)

Thank you and good morning. Joining me today for the call are our CEO Billy Hult, who will review our business results and key growth initiatives, and our CFO Sara Furber, 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, are our guidance of 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, earnings 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 earnings presentation. Information regarding market and industry data, including sources, is in our earnings presentation. Now let me turn the call over to Billy.

Billy Hult (CEO)

Thanks, Ashley. Good morning, everyone, and thank you for joining our fourth quarter earnings call. I am extremely proud of the Tradeweb team that helped produce the best revenue year and quarter in our history, crossing $2 billion in annual revenue for the first time. Our 2025 performance continues our seventh consecutive year as a public company producing double-digit revenue growth and the twenty-sixth consecutive year of record annual revenues. As I look back at 2025, a few thoughts that come to mind are our client's focus on data-driven tools for larger and more complex trades, the acceleration of automation, and the growing interconnectedness of global markets. As we look ahead, our ethos stays the same: continue to put forth rigor and discipline to help drive more innovation across our expanding markets. Our clients are now operating with an increased level of integration and sophistication across our markets.

We saw real traction in the extension of electronic trading into areas that had previously been mostly manual, from uncleared swaps and swaptions to block trading and global credit. Liquidity has become more interconnected across assets, regions, and time zones, essentially breaking down those historical silos that used to dominate our clients' workflows. At the same time, we have made significant strides alongside our key partners in moving digital assets from something built on a whiteboard to real advancement in market infrastructure and how our clients are thinking about trading and settlement. As we sit here at the intersection of TradFi and DeFi, we will continue to partner and invest across the digital asset landscape to deepen our network and drive more workflow efficiency solutions for our clients.

Diving into the fourth quarter on slide four, despite tough comparisons, strong client activity, share gains, and a risk-on environment drove 12.5% year-over-year revenue growth on a reported basis. We continue to balance investing for growth and profitability as fourth quarter Adjusted EBITDA margins expanded by 39 basis points relative to the fourth quarter of 2024. Turning to slide five, Rates produced a record revenue quarter driven by continued organic growth across swaps, global government bonds, and mortgages. Credit growth was led by strength across European credit, munis, CDS, and emerging market credit. Money markets revenue growth was led by record quarterly revenues across global repos. ICD balances continued to recover post-tariff volatility, and ICD revenues were up 11% relative to the third quarter 2025. Equities saw growth of almost 10% year-over-year, led by growth in global ETFs and equity derivatives.

Other revenues grew over 90% year-over-year as our emerging digital asset initiatives continue to scale. Finally, market data revenues were driven by growth in our recently renewed LSEG market data contract and proprietary data products. Turning to slide 6, our record fourth quarter capped off a record revenue year in 2025. Record volumes across all asset classes translated into 19% annual revenue growth on a reported basis. The scale generated by our strong top-line results drove 64 basis points of adjusted EBITDA margin expansion, 19% adjusted EPS growth, and 32% free cash flow growth. As our growth initiatives continue to scale, we maintained our tradition of constant and focused investment. Broadly, we enhanced our existing product capabilities, added new clients, and forged new partnerships. On the capability front, we achieved many first. We completed the first-ever fully electronic bilateral swaptions and U.S. multi-asset package trade across the swaps market.

We launched the first electronic platform for Saudi royal bonds and Mexican repos, and we launched portfolio trading in the European government bond market. We expanded our offering to ICD clients, allowing them to buy treasury bills directly through the platform. Additionally, we enhanced our RFQ offering across U.S. credit and ETFs and rolled out our dealer algo solutions within U.S. Treasuries. Beyond our core markets, we've been very focused on the future, especially the digital asset space. We have partnered with numerous startups and thought leaders, and we completed the first-ever on-chain U.S. Treasury repo transaction done over a weekend and the first-ever on-chain auction for brokerage CDs. We believe our investments in our core and frontier markets position us well for the future and also helped make 2025 another banner year for Tradeweb.

Moving to slide 7, 2025 continued the streak of robust revenue growth that we have worked hard to deliver for multiple years now. Specifically, while the majority of our revenues still come from rates, 42% of our annual revenue growth came from our other businesses in 2025. In fact, since the IPO, almost 50% of our revenue growth has come from non-rates businesses, with 45% of that growth from our rapidly expanding international business, which grew at 20% CAGR over the same period. Our European business continues to anchor our international presence, but our Asia-Pacific product suite continues to scale. In 2025, our Asian client revenues grew over 35%, and European client revenues grew over 25%. Strong momentum across Europe and Asia comes from connecting a global client base to local international 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 five years, we have invested over $600 million in technology to help shape the future of electronic markets, growing these investments at an average of 16% since 2020. As our investments bear fruit, adjusted EBITDA margins have expanded consistently. Turning to slide eight, this quarter saw yet another meaningful decline in intraday volatility from the elevated levels seen in prior periods. Specifically, volatility was down 27% year-over-year and 15% quarter-over-quarter. Despite the lowest intraday volatility that we have seen in the last four years, our U.S. Treasury revenues increased modestly by 1% year-over-year as continued strength in our institutional channel was offset by weaker retail trends. Our quarterly market share increased sequentially, with December market share reaching the highest levels since February of 2025.

As we look forward, we are optimistic on a reacceleration in U.S. Treasury business as we penetrate additional parts of the voice market, coupled with continued strong government debt issuance and normalization in rate volatility. Our competitive position remains strong on a relative basis. We exceeded 50% for the seventh consecutive quarter in electronic institutional U.S. Treasuries versus our main electronic competitor. Turning to wholesale U.S. Treasuries, revenues were flat, mainly driven by lower volumes across our wholesale streaming protocol, partially offset by growth across our sessions protocol. Wholesale remains a strategic priority as we focus on onboarding additional liquidity providers and strengthening our liquidity pools in support of our multi-protocol, holistic platform strategy. In equities, ETFs posted strong double-digit revenue growth as we continue to deepen integration with our clients.

During the quarter, we continued to leverage client workflow connectivity by delivering a more automated ETF trading solution in partnership with ION. Our AiEX automation solution has been a key differentiator with our ETF clients, with average daily trades increasing over 70% year-over-year. While AiEX is deeply penetrated across European ETFs, we continue to see strong adoption across U.S. ETFs, with AiEX average daily trades up 28% quarter-over-quarter. Our efforts to broaden our equity presence beyond our flagship ETF franchise continue to pay off, with record institutional equity derivative revenues up 18% year-over-year. Looking ahead, the pipeline remains strong as the benefits of our electronic solutions continue to resonate with our clients. We believe we are well positioned to capitalize on the long-term secular ETF growth story, not just in equities but across our fixed-income business.

Turning to slide 9 for a closer look at credit, low single-digit revenue growth for the quarter was driven by strong double-digit revenue growth across European credit, municipal bonds, credit derivatives, China bonds, and EM credit, which more than offset weakness in U.S. credit, where revenues fell year-over-year mainly due to retail corporate credit revenues that were down nearly 30% year-over-year, primarily reflecting the better relative yields our clients were getting across money markets and munis. U.S. credit remains a key growth initiative. We are focused on maintaining our leadership position in our pioneering portfolio and session trading protocols and increasing our block market share. Perhaps most importantly, we continue to increase our RFQ share, which we expect to be the number one driver of revenue growth in U.S. credit going forward.

Our deepening liquidity pool and continuously improving client experience is resonating as we attract more clients and experienced talent across the board. Our efforts to expand into RFQ are seeing early signs of success, with our RFQ share of overall TRACE achieving a new quarterly record. Institutional RFQ average daily volume grew over 10% year-over-year, with growth across both IG and high yield. We also saw continued block share growth in fully electronic U.S. investment grade and U.S. high yield of over 130 basis points and 65 basis points, respectively. This growth was broad-based, driven by continued adoption of our portfolio trading, RFQ, and sessions protocols. More broadly, we saw active user growth of 18% year-over-year during the quarter as we continue to strengthen our U.S. credit client network. Portfolio trading average daily volume also increased 10% year-over-year, with over 20% growth across international PT.

Portfolio trading has become a widely used, reliable method for executing trades and managing risk, particularly during periods of market volatility. As the market continues to evolve, we expect adoption to expand as it further embeds itself as an essential part of credit traders' toolkits. AllTrade had a strong quarter with over $200 billion in volume, with average daily volume up over 14% year-over-year. Our all-to-all average daily volume grew over 45% year-over-year, while our Sessions average daily volume rose by nearly 10% year-over-year. The team remains focused on expanding our network and increasing the number of responders on the AllTrade platform. In the fourth quarter, we saw the fourth highest level of ETF market maker participation ever across our institutional credit business. Beyond U.S. credit, we're continuing to prioritize our emerging markets' credit expansion efforts.

We continue to broaden out our liquidity provider set across key markets, work with our OMS partners on key integrations, and expand the functionality around key differentiators such as asset swaps. While still early in the journey, EM credit revenues grew 25% year-over-year in the fourth quarter, signaling strong momentum. Moving to slide 10, 2025 represents the 20th anniversary of our electronic interest rate swaps platform. Back in 2005, electronic swaps trading was still an emerging idea. Two decades later, it has become an ecosystem defined by transparency, efficiency, and ongoing innovation. Our leading position in the swaps market has been built upon two decades of helping to shape global regulations, maintaining a regulated global footprint, cultivating a deep client ecosystem, and expanding a broad suite of adjacent global rates products.

Global swaps delivered record quarterly revenues up over 25% year-over-year, driven by a combination of strong client engagement across our global suite of currencies that drove strong risk trading growth and a 7% increase in weighted average duration. Our quarterly core risk market share, which drives revenues and excludes compression trading, was a record, rising over 70 basis points year-over-year. Total market share increased from 20.8% in the fourth quarter of 2024 to 23.3% in the fourth quarter of 2025 due to a combination of strong risk and compression volume growth. During the quarter, we achieved the highest share in our history across euro, other G11, and EM-denominated currencies. The fourth quarter performance was driven by record revenues across Europe, APAC, and emerging market swaps, while we produced double-digit revenue growth across dollar swaps. We continue to make progress across emerging market swaps and our rapidly growing RFM protocol.

In EM/IRS, structural challenges like geographic dispersion, pricing opacity, and operational inefficiencies have historically made voice trading the norm. We're helping to drive more discrete, transparent, and efficient execution, especially through innovations like RFM and AiEX. Our fourth quarter EM swaps revenue produced another strong growth quarter, and we believe there is still significant room to grow given the low levels of electronification. Our RFM protocol, which is seeing strong adoption across currencies, also saw average daily volume grow more than 90% year-over-year, with further adoption picking up. Looking ahead, we continue to believe the long-term growth potential for swaps remains significant. On a DV01 basis, electronification has continued to increase, with 2025 DV01-based electronification up more than 90 basis points year-over-year and growing at an average rate of over 150 basis points annually since 2020 as dealers and clients move a greater share of their workflows electronically.

That progress is evident in the performance of our swaps business, which has continued to deliver strong revenue growth in the fourth quarter. On a notional basis, the cleared swaps market remains approximately 30% electronic, and we see significant opportunity to continue digitizing workflows alongside our clients. In collaboration with them, we expect to drive further workflow innovation in 2026 across both cleared and bilateral swaps markets. With that, let me turn it over to Sara to discuss our financials in more detail.

Sara Furber (CFO)

Thanks, Billy, and good morning. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted. Slide 11 provides a summary of our quarterly earnings performance. As Billy recapped earlier, this quarter we saw record revenues of $521 million that were up 12.5% year-over-year on a reported basis and 9.9% on a constant currency basis given the weakening dollar. We derived approximately 42% of our fourth quarter revenues from international clients and recall that approximately 30% of our revenue base is denominated in currencies other than dollars, predominantly in euros. Total trading revenues increased 11%, comprised of 10% variable trading revenue growth and 18% growth across fixed trading revenues. Rates fixed revenue growth was primarily driven by an increase in minimum fee floors for certain dealers and by the addition of dealers to our mortgage and U.S. government bond platforms.

Credit fixed revenue growth was primarily driven by the previously disclosed introduction of minimum fee floors and the migration of certain dealers to subscription fees. Other revenues of $13 million for the fourth quarter increased by 94%, primarily driven by growth in our digital initiatives. Specifically, we earned $6.6 million from our commercial relationship with the Canton Network from our role as a super validator on the network, where we are compensated in Canton Coins. Assuming similar Canton coin pricing as in January of 2026 and based on our current estimate of earned coins, we would expect 2026 Canton-related revenue to be similar to 2025, which was approximately $11 million, but this can vary.

Overall, the other revenue line will remain variable quarter-to-quarter, reflecting fluctuations in the number of Canton Coins earned, Canton Coin value, the number of super validators in the network, and periodic tech enhancements for retail clients. 2025 annual Adjusted EBITDA margin of 54% increased by 64 basis points on a reported basis when compared to our 2024 full-year margins. Our net interest income of $18.8 million increased due to higher cash balances despite lower interest yields. Lastly, this quarter's GAAP results were impacted by both unrealized and realized gains across our strategic investments. Specifically, we recorded $207 million in net gains this quarter, including $180 million of unrealized gains reflecting the mark-to-market of our Canton Coin holdings and $25 million in realized gains related to our exchange of Canton Coins for warrants in the digital asset treasury company Securitize.

As a reminder, these gains are only included in GAAP EPS and are excluded from our non-GAAP adjusted diluted EPS. Moving on to fees per million on slide 12 and a highlight of the key trends for the quarter. You can see slide 18 of the earnings presentation for additional detail regarding our fee per million performance this quarter. For cash rates products, average fees per million were down 5%, primarily due to a mixed shift away from U.S. government bonds, which carry a comparatively higher fee per million. For long tenor swaps, average fees per million were up 2%, primarily due to higher duration. For cash credit, average fees per million decreased 14% due to the migration of certain dealers from fully variable plans to fixed plans across institutional and wholesale U.S. credit and a mixed shift away from retail within U.S.

credit, which carries a higher fee per million. For cash equities, average fees per million decreased 10% due to a mixed shift away from European ETFs, which carry relatively higher fee per million, and a reduction in U.S. ETF fee per million given an increase in notional per share traded. Recall in the U.S., we charge per share and not for the notional value traded. Finally, within money markets, average fees per million decreased 6%, primarily due to a mixed shift away from retail CDs, which carry a comparatively higher fee per million. Slide 13 details our adjusted expenses. At a high level, the scalability and variable nature of our expense base allows us to continue to invest for growth and grow margins. We have maintained a consistent philosophy here. Adjusted expenses for the fourth quarter increased 12% on a reported basis and 9% on a constant currency basis.

During the fourth quarter, we continued investments in tech and communications, digital assets, consulting, and client relationship development. Adjusted compensation costs grew 5%, driven primarily by an 11% year-over-year increase in headcount, partially offset by lower accruals for performance-related variable compensation. Technology and communication costs increased 24%, primarily due to our continued investments in data strategy and infrastructure and increased software costs. Adjusted professional fees grew 17% due to an increase in tech consultants as we augment our offshore technology operations and due to episodic advisory fees related to legal, tax, and consulting services. Occupancy expenses increased 59%, primarily from increased rent due to the move to our new New York City headquarters. Adjusted general and administrative costs increased 27%, primarily due to unfavorable movements in FX and a pickup in travel and entertainment and marketing expenses.

Unfavorable movements in FX resulted in a $3.7 million loss in the fourth quarter of 2025 versus approximately a $1.1 million gain in the fourth quarter of 2024. Excluding FX, adjusted general and administrative costs grew 3%. Slide 14 details capital management and our guidance. On our cash position and our capital return policy, we ended the fourth quarter in a strong position with approximately $2.1 billion in cash and cash equivalents and free cash flow exceeding $1 billion for the year. We delivered strong free cash flow growth of approximately 32% year-over-year or 22% excluding a timing benefit related to the deferral of certain 2025 tax payments into the first quarter of 2026. We also held approximately 1.6 billion of Canton Coins with a fair value of approximately $243 million, which is recorded on our balance sheet under digital assets and other investments at fair value.

With this quarter's earnings, the board declared a quarterly dividend of $0.14 per Class A and Class B shares, up 17% year-over-year. During the quarter, as part of our 2022 share repurchase program, we repurchased approximately 990,000 shares for $106 million. Additionally, we have repurchased approximately 483,000 shares for approximately $51 million in January. There is currently $23 million remaining to be purchased under the 2022 share repurchase program. Finally, this morning, the board of directors approved the 2026 share repurchase program, which authorizes the repurchase of up to $500 million of the company's Class A common stock once the remaining authorization under the 2022 share repurchase program is exhausted. Turning to guidance for 2026, we will continue to invest in the business in 2026 and are expecting adjusted expenses to range between $1.1 billion and $1.16 billion.

The midpoint of this range would represent an approximate 11% increase year-over-year, relatively in line with our average expense growth since 2016. We believe we can drive adjusted EBITDA and operating margin expansion compared to 2025 at either end of this range, although we expect the incremental margin expansion to be more muted as overall margins are higher and we continue to focus on balancing margin expansion with investing for the future. Specifically, we continue to invest in credit, rates, international markets, ICD, and digital assets as key focus areas with a long runway for growth. We also continue to invest in technology that allows us to sustain and build on our leading platform. Some of these investments will take time to scale, but we continue to prize innovation in creating durable, long-term growth opportunities.

Within adjusted non-comp expenses, we expect our quarterly tech and communications expenses to grow in the mid- to high-teens over our fourth quarter run rate as we continue to invest in our data strategy and infrastructure to support the growth of our platform and new product initiatives. We expect annual G&A expenses to be impacted by continued FX losses, primarily impacting the first half of 2026 given current FX rates. We expect the first quarter of 2026 professional fees to step down sequentially by approximately $2 million from the fourth quarter of 2025 related to the previously mentioned episodic expenses. We expect annual occupancy expenses to increase approximately 35% year-over-year, primarily due to the full-year effect of our new New York City headquarters and the overall expansion of our geographic footprint.

For the first quarter of 2026, we expect net interest income of approximately $15 million, which reflects the current interest rate environment and a seasonally lower cash balance driven by annual bonus payments and the expected purchase of approximately $70 million of transferable tax credits in Q1 2026. For modeling purposes, we view the first quarter of 2026 as a good starting point for the rest of the year. For forecasting purposes, our assumed non-GAAP tax rate ranges from 23.5%-24.5% for the year. We expect CapEx and capitalized software development to range between $107 million and $117 million. The midpoint of our CapEx guidance implies a roughly 9% year-over-year increase. We estimate that approximately 60% of the total spend will be on software development to support our growth initiatives, and approximately 40% will be related to growth and maintenance CapEx.

Acquisition and Refinitiv transaction-related D&A, which we adjust out due to the increase associated with push-down accounting, is expected to be $160 million in 2026. Lastly, we expect 2026 revenue generated under the master data agreement with LSEG to be approximately $105 million, spread evenly throughout the four quarters. Now I'll turn it back to Billy for concluding remarks.

Billy Hult (CEO)

Thanks, Sara. Looking toward 2026, we see a constructive market environment taking shape. Even with lower volatility, issuance activity remains strong across governments, corporates, and increasingly AI-driven infrastructure investment supporting relative value trading and hedging flows across markets. Alongside the current regulatory backdrop, coupled with growing cross-border activity, these dynamics play directly to our strengths. With a global, multi-asset platform and deep client connectivity, we're well-positioned to support the next phase of market structure evolution and to continue delivering scalable, resilient workflow solutions for our clients. On that note, we reported record volumes in revenues in January, which translated into total revenue growth of 17% year-over-year. Recall, January 2025 had one extra trading day and also benefited from an $8 million boost in market data tied to the delivery of datasets to LSEG.

The revenue recognition of these datasets in 2026 will shift to $2 million being recognized in the first month of every quarter. Adjusting for these two factors, average daily revenue growth was 26% year-over-year, showcasing how our sophisticated clients and dealers continue to be very active across our global markets. I would like to conclude my remarks by thanking our clients for their business and partnership in the quarter. I want to thank my colleagues for their efforts that contributed to the record quarterly and annual revenues and volumes at Tradeweb. With that, I will turn it back to Ashley for your questions.

Ashley Serrao (Head of Treasury, FP&A, and Investor Relations)

Thanks, Billy. As a reminder, please limit yourself to one question only. Feel free to hop back into queue and ask additional questions at the end. Q&A will end at 10:30 A.M. Eastern Time. Operator, you can now take our first question.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. The first question today comes from the line of Patrick Moley of Piper Sandler. Your line is open.

Patrick Moley (Director and Senior Research Analyst)

Yes. Good morning and thanks for taking the question. So, Billy, I was hoping you could elaborate a little bit on your comments there you made at the end of your prepared remarks on the outlook for the market in 2026. What are some of the major themes that you're focused on this year? And then also, I think the 17% year-over-year revenue growth in January was a lot better than people were expecting. So any color you could give on what drove the strength there would be much appreciated. Thanks.

Billy Hult (CEO)

Yeah. Absolutely, Patrick. Thanks for the question. We're working hard, so appreciate your voice on this. It's a really good setup for our business. And maybe for a quick second, Patrick, let me give a moment of context. Even over the last kind of 5, 6 years, we've gone from kind of 0 rate, 0 inflation market to this kind of post-pandemic world where there was the kind of higher rates on the back of that big inflation burst to kind of where we are now, which is around this kind of what feels like this kind of general rates framework. We're in the 4% on 10-year notes, right? What we have is this obviously, it's been a conducive Fed. I think the feeling that we have here is that there's more to do.

But there still is, I think, something very important, which is real debate on the timing of it all. And those are good outcomes for us. And then you take a little bit of a step back from there, debt markets are growing, right? And we have this very active kind of primary activity issuance world now. Public sector and the private sector need funding, right? So even this past week, as you know well, Oracle issued $25 billion in bonds this week. That leads to rates trading as investors hedge out fixed exposure. I'll make the most obvious point of the day. AI is real, right? The hyperscalers will be selling bonds. And so when you think about the big picture of it for a second, the numbers that we're talking about, $600 billion of AI infrastructure spent, right? That's going to lead to more rates trading.

And those things, from our perspective, are good. As the leading rates trading platform, those are good outcomes for us, and those are things that we feel good about. So, as you know, for example, in January, our global swap platform was up over 40% on revenue. Really strong month for our treasury platform, right? You can see how these things kind of work to our favor. The geopolitical complexity kind of drama, whether or not we want to think about the debasement trade or diversification away from U.S. assets, at a minimum, what we're talking about, obviously, is central bank policy divergence. From our perspective, what's that going to do? It's going to spur more cross-border trading, more global activity. And we have, as you know well, a global enterprise, and our international business is exceptionally strong.

So in January, we saw exceptionally good results from our European swaps business, European government bonds, very strong numbers coming out of European credit. The revenues there were up 40%. Big news, obviously, happening this month in Japan. Our JGB revenues were up 30% in January. So the international business that we bring to the table that we've worked very hard on building, I think, is an advantage for us kind of going forward. Getting very just quickly into a version of kind of what's happening with equities doesn't take a big leap to understand that perhaps the index is full. We could be looking at a world where there's more kind of drawdowns there. It's going to be about kind of allocating resource into kind of more sector exposure, more country exposure.

Those kinds of thoughts and that kind of theme, I think, plays extremely well to the ETF business that we've worked very hard here on building. And so our global ETF revenues were up 40% in January. So these are good outcomes for us and a good setup. And then I think as we think about maybe one of the more important components to kind of how we're thinking about 2026, sometimes things are kind of in our control, and sometimes things can be a little bit out of our control.

As you know well, there's this concept, obviously, that I think is really important just around the deregulation of the banks and the way that ultimately that's going to and has led to these extremely strong kind of trading operations coming out of how we think about the legacy banks, but really, from our perspective, kind of the partner banks for us. And so I kind of say this with a little bit of humor. The swag is back for these firms, and the numbers kind of prove it. And from my perspective and from Tradeweb's perspective, these are great outcomes for us. These are, in a lot of ways, 25-year relationships that we've had with firms like Goldman and firms like Morgan Stanley, J.P. Morgan, and Citi.

And so as risk-taking kind of is back in vogue and the profitability of the business for these partners of ours is extremely high level, I think the quote that I looked at was, "Between Goldman, Morgan Stanley, J.P. Morgan, and Citi, in FIC in 2025, they made over $55 billion," right? As a trusted partner in the markets with those kind of firms, it's an incredibly good outcome for us to see the profitability of those businesses. And so that's an important thing as we think about the outcome and the setup for 2026. And then the other thing I would just say is this concept of risk events is always going to be a part of our world.

And it's pretty interesting if you think about just the way the market kind of tended to shrug off some real risk events in kind of December and January. As you know, the 10-year kind of stayed between 4.1%-4.2% around some pretty big headline news, whether or not that was the Justice Department with actions against Powell or military action in Iran. These are pretty big headlines. I think there's a thought process sometimes that the market has the ability to only price in what's right in front of it. There are moments, from our perspective, where that kind of ends. And so the concept of living with exogenous risk is a part of the cadence of how markets develop.

And so the last piece of kind of secret sauce around how things will develop is ultimately going to be the return of good risk orientation into our world. And so I step back and I say a very good rates framework for activity going forward, kind of green light there. Continued cross-border global activity, green light there. Diversified equities exposure, green light there. And then a business environment that's keyed positively in the marketplaces off of deregulation. And I don't love to kind of root for, obviously, exogenous events, but we know that risk comes back into the system, and that's part of the cadence of our world. So I take these things and I add them up. And I think the reality is that we form a strong picture for our business. And so I'm pumped. I'm excited for what's in store for the markets.

I'm excited about Tradeweb's leadership role around all the things I just described. And we're looking forward to a really good 2026 on the heels of a very strong January and, obviously, very early stage, but a really strong start to February. So it's a good outcome for us and a good marketplace. And thanks for the question.

Patrick Moley (Director and Senior Research Analyst)

Very helpful, Billy. Thank you.

Billy Hult (CEO)

Yep.

Operator (participant)

One moment for the next question. Our next question is coming from the line of Craig Siegenthaler of Bank of America. Your line is open.

Craig Siegenthaler (Managing Director and North American Head of Diversified Financials)

Good morning, Billy, Sara. Hope everyone's doing well. We had a question on AI. We know automation is a key component of your AiEX solution. But as you take a step back and look across the entire Tradeweb platform, can you talk about your utilization of AI and also differentiate between both generative AI and predictive AI models?

Billy Hult (CEO)

Absolutely. And great question. I'll make you kind of laugh for a quick second. As a kind of ex-English major, it's always a pinch-me moment on an earnings call to kind of have a conversation about AI. So it's kind of really fun for me. But my view and the company's view is always going to be shaped, I think, ultimately by pragmatism. You expect us to be, and we will be, always kind of commercially focused. We think about AI and how it's tightly linked, truthfully, to how we make money. And it's always, from my perspective, very specifically been about this kind of transition from how we think about efficiency gains to ultimately the most important thing, which I think is effectiveness gains and ultimately what is that kind of client impact engine kind of thing. And those are really kind of important thoughts.

And so, as you know very well, we have this very deep, high-quality, real-time market data. From my perspective, that's the real strength of Tradeweb. Our proprietary data comes from running and operating kind of markets first and foremost. And so we see extensive executable pricing, RFQ response behavior, execution outcomes, and client decision-making across protocols and asset classes as key to all of this. We've always been built around providing, ultimately, more efficient workflow tools for our clients. And I think we would say clearly that AI is a natural extension of that. And so we, as an English major, again, with pride, I'll say we really employ a very deep bench now of the strongest kind of data scientists, the strongest minds inside of Tradeweb.

One of the things that we, I think, have done well, and Sara and I talk about this a lot, is the collaboration between those minds and our business. They sit directly with our product team and working on helping, ultimately, deliver better analytics and smarter tools. These are really important kind of behavior patterns, I think, for companies to do those kinds of integrations. So on the predictive AI side, I would say we are kind of looking at our proprietary datasets to help unlock what we describe as the next frontier of electronification, something we find particularly valuable across how we would describe less liquid markets and larger notional trades. So that's a focus for us where our pricing signals tend to be the weakest. That's a kind of big area of focus.

So I'll go back a little bit as we're talking about kind of AI or how we think about superintelligence. I make a point all the time, which is all intelligence is really, ultimately, about learning. As a company, you have to be kind of continuously on this kind of learning journey, this journey about learning and getting better. So one of the things I know that Sara and I talk about and our ex-com talks about a lot is the ability to keep learning. I think you have to be willing to make mistakes. You have to be willing to push things into new outcomes. That's the mindset, ultimately, that a company needs to continue to move forward on this amazing new path around learning. We can all get smarter.

I'm very excited for Tradeweb to play a very strong leadership role around how AI continues to be applied into the financial markets. Thanks a lot.

Operator (participant)

One moment for the next question. The next question is coming from the line of Alexander Blostein of Goldman Sachs. Your line is open.

Alexander Blostein (Managing Director and Senior Equity Analyst)

Hey, Billy. Hey, Sara. Good morning, everybody. Sara, one for you. I was hoping you can talk us through how you're thinking about the interplay between Tradeweb's sort of annual expense growth trajectory and margins, so just taking the guidance you provided this morning. Obviously, the revenue backdrop started off really well this year. But as you sort of think about the goal for operating leverage for 2026, is that still the case if revenue moderates? And if it does moderate, maybe talk a little bit about the flex you have in the expenses in order to still drive positive operating leverage.

Sara Furber (CFO)

Thanks, Alex. Great question. I think when we talk about operating leverage and margins, expenses, I think it's actually a really important reminder in terms of what's our top priority. Our top priority is investing for revenue growth through various cycles. So when you think about that, the way we've designed our expense base is to support that and to deliver and be able to deliver positive operating leverage across all these different revenue environments and through the cycles. So what does that really mean? That means when you think about our expense base, roughly 55%, so a little bit more than half, is fixed. The remainder, so about 45%, a meaningful portion, are variable or discretionary. Variable being things that automatically right-size with revenues, commissions, performance-driven compensation, exchange fees.

Discretionary being things more like marketing, T&E, the pace of hiring, philanthropy, things that are within our control. And that balance allows us to maintain operating leverage through different environments. And we can do things in both directions. We can accelerate the pace of spend, and we can decelerate the pace of spend. We can do that with the flexibility while still protecting, which I think is really that first priority, investment strategies that are often multi-year that drive long-term revenue growth through the cycle. And so, obviously, as the size of the company has scaled and as our revenues have scaled, there's also natural operating leverage that falls to the bottom line. Billy talked about being pragmatic earlier. I would say all of this is great. Flexibility is great as a theoretical point.

But the reality is, I think we've already demonstrated our willingness and ability to execute on that flexibility. So if you think back and you got to think back a little bit. But if you think back to the first half of 2023, the environment was such that the top-line revenue for Tradeweb grew about 5%. And even in that environment, we paced expenses and were able to deliver positive margins, so 43 basis points of margin expansion for EBITDA. Contrast that with just a year later, in 2024, you'll remember the top-line grew 29%. We were able to accelerate our investments and expenses significantly, and therefore, margin expansion was around 90 basis points. Last year, same thing. You had a really different environment in the first half of the year and the second half of the year. So I think we've proven our ability and flexibility.

But most importantly, our strategic lens is on continuing to invest, continuing to innovate, and having that flexibility to do it when our clients need it, which means doing it through the cycles. But thanks for the question. Hopefully, that helps.

Alexander Blostein (Managing Director and Senior Equity Analyst)

It does. Thank you.

Operator (participant)

One moment for the next question. Our next question is coming from the line of Ken Worthington of J.P. Morgan. Your line is open.

Ken Worthington (Managing Director and Senior Equity Research Analyst)

Hi. Good morning. And thanks for taking the question. My question's on mortgage. So Tradeweb's mortgage business was one of its slower-growing businesses in 2025. As one of Tradeweb's most dominant legacy and most electronic markets, how do you think about the outlook for mortgage trading in 2026, particularly if primary and refi activity rebounds? And then maybe as a second part to this, are the innovations that we're seeing at firms like ICE and others in mortgage tech, are these innovations possibly going to have an impact, positive impact, on your business over time? What are you sort of thinking there?

Billy Hult (CEO)

Hey, Ken. I feel like you almost complimented and insulted us at the same time with that very excellent question. It's always great to hear your voice. I mean, you've known us for a while. Obviously, you know me as a CEO. But to make you laugh for a quick second, I'm also a father too. So you also, I think, understand very well that expression that all of us parents have, which is kind of all of our children are equally smart, all of our children are the most beautiful, we love all our children the same, all of our children are our favorite children.

I think there's a possibility that the mortgage business might be my actual favorite child, which I haven't told anyone that yet until right this second, because in a lot of ways, it kind of represents some of the best things about the company for a long time. It's the most electronic market that we have. It's the market that we have the highest market share in. It's the first market that we were in to have what I would describe to you as something very important, which is real risk flow. We talk about risk all of the time, the elusive risk and credit. The mortgage market, I think, for a bunch of reasons, one of which was, Ken, the ethos of kind of how mortgage bankers kind of dealt in the market, was always very comfortable trading real risk electronically in comp.

Those are the kinds of characteristics that play very well to electronified marketplaces. And then it was the first market that we were in that actually we wound up kind of expanding into wholesale. So it was the starting point for us to ultimately move into the wholesale side of the market and build out these really important mirrored kind of liquidity pools. So it's got the kind of favorite childness around all of those things. But the reality is, which you framed properly, is that that market can go sleepy at times. It can be a sleepy market depending on where rates are. And then when it wakes up, it can wind up being one of the sort of two or three most important kind of coupons, ultimately, in global markets. So there's very big different levels of activity depending on where we are in the rate cycle.

I think the reality is we are kind of out of sleepy zone. We have primary issuance increasing. We have actively managing kind of pipeline risk, adjustments around duration and convexity exposure kind of happening. So the market is, without question, kind of coming to life. We also, as you know, I think, had pretty big headlines in January with the GSE commentary coming out of the administration. The administration wants lower mortgage rates, and they tend to get sometimes what they want. So there was a material pickup in activity in January. Our revenues were up 15%. I think the outlook for that business is quite strong, particularly if we break lower on rates. I think the future of it is going to have, ultimately, I think, and very importantly, a larger group of players as participants.

If you really think about it, it's kind of interesting. The systematic players that are very strong companies, as you know, Ken, very well in adjacent marketplaces like government bonds, have largely, I think, because of the cycles that the business goes through, have largely stayed out of the mortgage market. But we see those types of companies ultimately coming into that market. And from our perspective, I think that kind of pushes things towards a more velocity-driven marketplace, which is good for business. I follow pretty closely things that Jeff does on the mortgage servicing side. I think he's been kind of right on his thesis all along. Tough to time it, I would say. But ultimately, as he makes origination and he makes the servicing aspect of the marketplace more efficient, those become good aspects of secondary trading.

We feel like we'll ultimately also be, ironically, the beneficiary of that as well. So in an interesting way, kind of rooting for him on the efficiency play that he's been working on. And we think directionally, he's been right in terms of that area of the business needing a step up in technology. But I appreciate the question, and thanks very much, Ken.

Ken Worthington (Managing Director and Senior Equity Research Analyst)

Great. Thank you.

Operator (participant)

One moment for the next question. Our next question will be coming from the line of Alex Kramm of UBS. Your line is open.

Alex Kramm (Managing Director and Senior Equity Research Analyst)

Hey. Good morning, everyone. Billy, I saw you on a panel on tokenization a few weeks back. Sounds like you're doing a lot on that topic, a lot of initiatives. So maybe today, can you talk a little bit more specifically what you're doing and maybe some of the timing of those initiatives that you have going right now? Also, since I'm sure there's a lot going on, where do you actually see the biggest revenue opportunities coming out of this? And then on the other side of the coin, because I need to ask, since you're kind of pretty critical connecting buy and sell side today, as those underlying markets potentially change here and get digitized or tokenized, how do you ensure that you're not going to get this intermediated as people may be looking for new rails, etc.?

Billy Hult (CEO)

Yeah. All good questions, Alex. Appreciate it very much. As I'm sure you heard me kind of on the panel confusing everyone, just for a quick second, I'm going to actually kick this to Sara, who's been spending a ton of time on this. And I'm really looking forward to kind of hearing you, Sara, kind of describe this perfectly. So you take it.

Sara Furber (CFO)

Yeah. Alex, I'll start just kind of where you left off, which is a little bit of the big picture and how do we think about disintermediation. On tokenization, we don't really view it as disintermediating what we do. We think of it as an infrastructure upgrade. It's not replacing market structure and, in particular, doesn't really impact price discovery. So as we see things evolve, we think people still need platforms that connect buyers and sellers. They need to be supported in terms of price discovery. They need to manage that risk transfer and, importantly, deeply integrate into institutional workflows, which are things that we think we are still well-positioned to do given how long we've been investing in this space and can do it, whether it be traditional rails or on these digitized, more modern rails.

What we do see tokenization impacting are things like settlement and collateral mobility. And I know, Billy, you talked about this on the panel, which we think frees up capital, increases velocity of trading over time. We've talked about potential for 24/7 trading before, all positives from our seat in terms of the big picture. More specific to us, and Billy and I and Chris Bruner here have been spending a lot of time on this. We've been at this for a while. So for the last three years, and I would add with my CFO hat on, in a remarkably capital-efficient way, we've built out a leadership position, whether it be digital assets, blockchain networks, or tokenization. And today, I'll give you one specific example. We feel like we're positioned to be the premier venue for tokenized trading for U.S. Treasuries.

We've talked about this, I think, on other earnings calls. We've completed multiple rounds of fully on-chain repo trades utilizing tokenized Treasuries as collateral versus stablecoins with the notion of expanding for other forms of collateral like digital cash. So that's already been in the works since the third quarter of last year. More recently, which I think is interesting and a little bit to your timing point, we think we're sitting in a unique position during what you would argue might be a milestone year. The SEC delivered a No-Action Letter to DTCC this December. Tradeweb is positioned as the non-equity venue, really leading the charge for their pilot program where trillions of assets that sit at DTCC will now be tokenized on an opt-in basis from their clients.

And so if you think about what that means, that program can launch at the second half of this year. That opens up a real opportunity. And we think tokenized Treasuries, given what we've already put into the market, will be a place to start, and from there, we'll grow. I don't think anything changes overnight. Billy and I talk about that. We think clients, as we know better than anyone, take time to change. We do see interest. But I think the reality is the tokenized rails, digitization, and blockchain will operate side by side with a lot of traditional rails in the marketplace. And we think we can bridge that quite well for clients. And as a result, I think from a revenue opportunity, it's early to say exactly how it plays out.

But we see opportunities to drive revenue in our traditional trading business as well as new opportunities, given our leadership position on some of these networks, developing apps, and bringing other market participants, given our institutional and dealer network, onto some of these digitized rails. But.

Billy Hult (CEO)

And I think that's spot on, Sarah. And then for a quick second, Alex, kind of almost tying your question a little bit in an interesting way back to kind of what Ken was asking about, if you just think about for one second just about the concept of, obviously, the guardrails of collateral management and ultimately problem-solving around kind of settlement. I was talking about my favorite child before, the mortgage market, which has, in a lot of ways, within the fixed-income complex, the most onerous settlement cycle. And I think that settlement cycle, in a lot of ways, is one of the reasons why there are the types of entities that have been performing exceptionally well in other markets have tended to either stay away from or have a lower impact in that market.

For sure, as we see the continued advancement of blockchain, and we've talked a lot about our partnership with Canton, as we see that continued advancement there, we've identified the mortgage market as one of those businesses where, from our perspective, a great commercial outcome would be onboarding more participants. We see a streamlined settlement process as a very important outcome there. That's an area of focus and attention for us that has a good commercial outcome. Good to hear your voice, Alex. Thanks.

Alex Kramm (Managing Director and Senior Equity Research Analyst)

Oh, no. Thank you.

Billy Hult (CEO)

Yeah.

Operator (participant)

Thank you. One moment for the next question. The next question will be coming from the line of Taylor Miller of William Blair. Your line is open.

Jeff Schmitt (Equity Research Analyst)

Hi. I'm on for Jeff Schmitt. We had one question on share buybacks, given the strength of the quarter in January and new authorization. So the stock's down a fair amount over the last six months. I think it's now trading near the lowest PE since going public. Is there potential for you to increase your buybacks at all?

Sara Furber (CFO)

Thanks, Jeff. We're definitely giving more thoughts to buybacks. I think you've heard us talk about our positioning and view of the forward market and the macro environment and our business performance, not only in January, but that momentum continuing in February. So we remain confident in what we can drive and deliver. And we do think that you've seen the stock dislocate from some of those fundamentals. You've already seen us, and I think you're aware of this, you've already seen us be more aggressive. So in the fourth quarter and through January, we've repurchased about $150 million of stock, and the board authorized an additional $500 million plan. So we think we have the flexibility to continue to do it. I think from our seat, it's one piece of our capital allocation framework. So it's one that we definitely have in our arsenal.

But we also feel quite strongly that we have a lot of opportunity to grow the business organically. We have the opportunity to pursue inorganic investments and M&A. And obviously, share repurchases, particularly when the stock dislocates from what we think is our fundamental growth opportunity, we'll use that tool as well. And thank you.

Operator (participant)

Thank you. One moment for the next question. And the next question will be coming from the line of Simon Clinch of Redburn. Your line is open.

Simon Clinch (Managing Director and leads Financials Research)

Hi. Thanks for taking my question. Billy, I was wondering if you could characterize the competitive environment in credit today. This is clearly a focus of the investment community, particularly given they have the market share data out there all the time. So what do you see as the biggest catalyst for improvement in share for Tradeweb going forward from this point and how that sort of competitive dynamic shapes up over the next one year to five years?

Billy Hult (CEO)

Yeah. Good question. I would agree completely. It's competitive. I would agree completely with you that it's a focus of the analyst world and the investor world. I wouldn't go so far as to say it's an obsession, but it's a focus for sure. I would start by saying just as a reiteration, we feel very, very comfortable competing. It's part of who we are. We've been competing day one as we built this company over 25, 27 years with Bloomberg. The competitive framework is something that's comfortable to us. I think the path forward on continuing to grow revenue and grow share is going to be pretty straightforward. You have to be on side with the banks. I described that before when I was talking about the framework going forward to 2026.

If you're on the wrong side with the banks as this next leg of evolution occurs in credit, you're on the wrong side. We think our relationships with the banks is a game-changer for us there. You have to continue to be able to link markets. So again, we feel like our footprint in Treasuries is kind of important there. Obviously, the cross-asset piece of how we approach the market, I think, is important. Data, pre-trade data, the ability to present clients with the best data, I think is, again, very important principles for us to keep in mind. Then ultimately, I'm going to get into kind of the two things that we feel very strongly about, which is solving for risk and solving for what we would describe to you as banks' inventories and banks' trading access.

To make an obvious point, if you don't do the first three things I described at the highest level, which is partnership, the ability to bring in other marketplaces, and ultimately have the best data, then you cannot solve for ultimately what is risk trading and what is complexity. And so month to month, quarter-to-quarter, we are focused on the credit business. We grew revenues, as you know, quite well in the month of January. So we're feeling good directionally about how we're positioned there. It is an enormous focus for me and for the company to continue in a competitive environment, to be best in class there. And that's the mandate for us as a company. And appreciate it. Good question.

Simon Clinch (Managing Director and leads Financials Research)

Thank you.

Operator (participant)

Thank you. One moment for the next question. Our next question is coming from the line of Bill Katz of TD Cowen. Your line is open.

Bradley Hayes (Equity Research Analyst)

Hi. It's Bradley Hayes on for Bill Katz. Following up on tokenization, as assets increasingly become tokenized, how are you thinking about the impact for the swaps market? In particular, is there risk to volume from smart contract functionality?

Sara Furber (CFO)

Sure. Why don't I jump in with that? I think similar to how we talked about tokenization, smart contracts really takes away the friction in the swaps market, potentially, that sits downstream past execution in terms of the value chain that we're in. So it really streamlines affirmations, confirmations, clearing that post-trade lifecycle management, which we think is really helpful and only furthers the electronification and the trading velocities in this space. But from our seat, it doesn't disintermediate or really impact the value that we are offering in terms of our markets.

Operator (participant)

Thanks. Thank you. Thank you. At this time, I would like to go ahead and turn the call back over to Billy Hult, CEO, for closing remarks. Please go ahead.

Billy Hult (CEO)

Great. I know, Sara and I, both appreciate a very busy day for everyone on the call. Appreciate your time. Thank you all very much for joining us. Any follow-up questions, obviously, please feel free to reach out to Ashley, Sameer, and our great team. Everyone, have a great day. Thanks very much.

Operator (participant)

Thank you all for attending today's program. You may now rest. Good night.