Earnings Call Transcript - TW Q4 2025

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

Good morning. And welcome to Tradeweb Markets Inc.'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. 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 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, 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, 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 Markets Inc. team, which 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 clients' 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 in 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% 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 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 the tariff volatility, and ICD revenues were up 11% relative to the third quarter of 2025. Equity 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 initiatives continue to scale. Finally, market data revenues were driven by growth in our recently renewed LSAG market data contract and proprietary data products. Turning to slide six. 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 firsts. We completed the first-ever fully electronic bilateral swaptions and US 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 ICD clients, allowing them to buy treasury bills directly through the platform. Additionally, we enhanced our RFQ offering across US credit and ETFs and rolled out our dealer algo solutions within US treasuries. Beyond our core markets, we've been very focused on the future, especially the digital asset space. We have partnered with numerous start-ups and thought leaders and we completed the first-ever on-chain US treasury repo transaction done over a weekend and the first-ever on-chain auction for brokered CDs. We believe our investments in our core and frontier markets position us well for the future and also help to make 2025 another banner year for Tradeweb Markets Inc. Moving to slide seven. 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. The last five years, we've 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 US 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 2025. As we look forward, we are optimistic on a reacceleration in US 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. Exceeded 50% for the seventh consecutive quarter in electronic institutional US treasuries, versus our main electronic competitor. Turning to wholesale US 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 continue to leverage client workflow connectivity by delivering a more automated ETF trading solution in partnership with ION. Our AIX automation solution has been a key differentiator with our ETF clients with average daily trades increasing over 70% year-over-year. While AIX is deeply penetrated across European ETFs, we continue to see strong adoption across US ETFs. With AIX 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 nine 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 US 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. US credit remains a key growth initiative. We are focused on maintaining our leadership position and 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 US credit going forward. Our deepening liquidity pool and continuously improving client experience is resonating. As we attract more clients and experience 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. Also saw continued block share growth in fully electronic US investment grade and US 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 US 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. Altrade 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 US 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 twentieth 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 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 2024 to 23.3% in 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 AIX. Our fourth-quarter EM swaps revenue produced another strong growth quarter and we believe 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 DVO1 basis, electronification has continued to increase with 2025 DVO1-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. And 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. Rate 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 US 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. We are compensated in Canton coins. Assuming similar Canton coin pricing as in January 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, TheraMune. 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 regarding our fee per million performance this quarter. For cash rates products, average fees per million were down 5%, primarily due to a mix shift away from US 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 US credit. And a mix shift away from retail within US credit, which carries a higher fee per million. For cash equities, average fees per million decreased 10% due to a mix shift away from European ETFs which carry relatively higher fee per million, a reduction in US ETF fee per million, given an increase in notional per share traded. Recall in the US, 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 mix 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 $37 million loss in 2025, versus approximately a $1.1 million gain in 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 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 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 at $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 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 2026 given current FX rates. We expect the 2026 professional fees to step down sequentially by approximately $2 million from 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 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 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% to 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 DNA, 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 LSAG 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, Sarah. 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 and 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 Markets Inc. 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 in the queue and ask additional questions at the end. Q&A will end at 10:30 AM Eastern Time. Operator, you can now take our first question. Thank you. We also ask that you please wait for your name and company to be announced before proceeding with your question. The first question today comes from the line of Patrick Moley of Piper Sandler. Your line is open.

Patrick Moley, 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. Over the last five to six years, we've gone from a zero rate, zero inflation market to this post-pandemic world where there was a roof on rates due to a big inflation burst. Now, we find ourselves in this framework with ten-year notes around 4%. It's been a conducive Fed environment, and I think the feeling is that there's more to do. However, there's also significant debate on the timing of it. These outcomes are good for us. Additionally, debt markets are growing, and public and private sectors need funding. We recently saw Oracle issue $25 billion in bonds this week, leading to rates trading as investors hedge fixed exposure. AI is real and the hyperscalers are going to start selling bonds. With $600 billion earmarked for AI infrastructure, it's going to lead to more rates trading, which from our perspective is positive. In January, our GlobalSwap platform saw revenues up over 40%, and our treasury platform had a really strong month. January also brought a complex geopolitical landscape that might spur more cross-border trading and higher global activity. Our international business performed exceptionally well, with European swaps business revenues up 40% and European government bonds also strong. The index allocations are changing, leading to more sector and country exposure, which plays in favor of our ETF business that we’ve worked hard to build, seeing a 40% revenue rise for globally ETFs in January. All in all, good outcomes and a favorable setup for us as we head into 2026, coupled with a strong start to February.

Patrick Moley, Analyst

Very helpful, Billy. Thank you.

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

One moment for the next question. And our next question is coming from the line of Craig Siegenthaler of Bank of America.

Craig Siegenthaler, Analyst

Good morning, Billy, Sara. Hope everyone's doing well. We had a question on AI. As you look across the entire Tradeweb Markets Inc. platform, can you talk about your utilization of AI and also differentiate between both generative AI and predictive AI models?

Billy Hult, CEO

Absolutely. Great question. As a former English major, it's a pinch-me moment to discuss AI on an earnings call. Our view is shaped by pragmatism. We see AI as closely linked to how we make money and transition from efficiency gains to effectiveness gains. Our real-time market data is a strength, and we analyze extensive pricing RFQ response behavior, execution outcomes, and client decision-making as key components. AI is a natural extension of our focus on providing effective workflow tools for clients. We have a solid team of data scientists working closely with our product team to enhance our analytics and smarter tools. On the predictive AI side, we’re exploring our proprietary datasets to aid electronification, especially in less liquid markets and larger trades. Continuous learning and adaptation are essential, and we aim to lead in applying AI to financial markets.

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

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, Analyst

Hey, Billy. Hey, Sarah. Good morning, everybody. Sarah, one for you. I was hoping you can talk us through how you're thinking about the interplay between Tradeweb Markets Inc.'s sort of annual expense growth trajectory and margins. So just taking the guidance you provided this morning, 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. When we discuss operating leverage and margins, our top priority remains investing for revenue growth through various cycles. Our expense base is designed to support this and deliver positive operating leverage across different revenue environments. About 55% of our expenses are fixed, while 45% are variable or discretionary, allowing us to adjust pace in either direction. We maintain flexibility in spending while investing in long-term strategies. Our historical performance shows our ability to manage expenses effectively, delivering positive margins even during low growth periods. We have consistently shown we can balance expense growth while prioritizing investments for future revenue generation.

Alexander Blostein, Analyst

It does. Thank you.

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

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

Ken Worthington, Analyst

Hi. Good morning, and thanks for taking the question. My question's on mortgage. Tradeweb Markets Inc.'s mortgage business was one of its slower-growing businesses in Q4 2025. How do you think about the outlook for mortgage trading in 2026, particularly if primary and refinancing activity rebounds? Also, are innovations at firms like ICE in mortgage tech likely to positively impact your business over time?

Billy Hult, CEO

Hey, Ken. You give us a compliment and an insult at the same time with that question. It’s always great to hear your voice. You’ve known us for a while, and as a father, I can say all my children are my favorites. However, I think the mortgage business may be my actual favorite child. It has traditionally represented the best aspects of our company. It’s our most electronic market with the highest market share and real risk flow capabilities, which are crucial for electronic marketplaces. While the market can be sleepy depending on rates, we've seen primary issuance increasing and a pickup in January activity due to recent governmental commentary pushing for lower mortgage rates. Our revenues were up 15%, and we have high expectations if rates go lower. Additionally, I see more systematic players entering the market, which could push us toward a faster, more velocity-driven marketplace – good for business. Moreover, I respect what Jeff is doing on the mortgage servicing side, kind of rooting for his efficiency play, believing it would be a good outcome for the secondary trading market. So the outlook looks strong, especially if we break lower on rates.

Ken Worthington, Analyst

Thank you.

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

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, Analyst

Hey. Good morning, everyone. Billy, I saw you on a panel on tokenization a few weeks back. Can you talk a bit about what you're doing on that topic, some of the timing of those initiatives, and where you see the biggest revenue opportunities next? And on the other side, how do you ensure you won’t be disintermediated as the market changes with new tech?

Billy Hult, CEO

All good questions, Alex. I'm going to pass this to Sarah, who’s been deeply involved. Sarah, take it away.

Sara Furber, CFO

From a high-level perspective on disintermediation, we don't view tokenization as something that negates our role. We see it rather as an infrastructure upgrade, one that doesn’t replace market structure and importantly, doesn't impact price discovery. Platforms are still needed for connecting buyers and sellers and managing risk transfer. Tokenization primarily impacts aspects like settlement and collateral mobility, which we believe can enhance trading velocity over time. We’ve made substantial investments over the past three years in digital assets, blockchain networks, and tokenization, positioning ourselves as a premier venue for tokenized trading for US Treasuries. We've successfully conducted multiple fully on-chain repo trades using tokenized treasuries, and our leadership is expected to carry forward with the SEC’s no-action letter to DTCC. While transformations take time, we see significant revenue opportunities in these areas alongside our existing traditional trading business.

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

Thank you, Sara, and Billy. One moment for the next question. The next question will be coming from the line of Tyler Moore of William Blair. Your line is open.

Tyler Moore, Analyst

Hi, I'm on for Jeff Schmitt. We have one question on share buybacks. Given the strength in the quarter in January and new authorization, I'll note that the stock has seen a fair amount of decline recently and is trading near its lowest P/E since going public. Is there potential for you to increase your buybacks?

Sara Furber, CFO

Thanks, Jeff. We are considering our buyback strategy. We’ve noted our business performance metrics this year, particularly in January, and we are confident in our strength. We believe the stock has dislocated from fundamentals, and you’ve already seen us be more aggressive in the fourth quarter and through January by repurchasing around $150 million of stock while having an additional $500 million buyback plan authorized by the board. We believe we maintain flexibility to continue repurchasing shares, and we also have ample opportunities for organic growth and potential M&A that we are pursuing, along with share repurchases when the stock is dislocated from our fundamental growth potential.

Tyler Moore, Analyst

Thank you.

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

One moment for the next question. Our next question will be coming from the line of Simon Alistair Clinch of Rothschild. Your line is open.

Simon Alistair Clinch, Analyst

I was wondering if you could characterize the competitive environment in credit today. What do you see as the biggest catalysts for improving market share for Tradeweb Markets Inc. over the next one to five years?

Billy Hult, CEO

Good question. I agree the competitive landscape is an important focus for the analyst and investor communities. We feel very comfortable competing—it’s part of who we are. Over the past twenty-five years, we’ve been competing against Bloomberg. Going forward, the key to growing revenue and share lies in ensuring strong relationships with banks and linking markets effectively. Providing superior pre-trade data and fostering deep client connections is imperative to solving for risk and other complexities. We’re committed to this space, and we expect to see continued revenue growth, particularly through our strong January performance in the credit sector, which reinforces our belief in maintaining best-in-class operations.

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

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

Bradley Hayes, 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 on the swaps market? Is there a risk to volume from smart contract functionality?

Sara Furber, CFO

Sure. Smart contracts can significantly reduce friction in the swaps market, particularly in affirmations, confirmations, and clearing, enhancing the post-trade lifecycle management. This evolution will bolster electronification and increase trading velocities. However, it does not undermine the value we provide in market transaction facilitation.

Billy Hult, CEO

Great points, Sara. Thank you. I appreciate everyone's insights and questions today. It has been a busy day for everyone on the call. Thank you for joining. Any follow-up questions can be directed to Ashley, Sameer, or our great team. Have a great day.

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

Thank you all for attending today's program. You may now disconnect.