Executive Summary / Key Takeaways

• Tradeweb Markets delivered its best revenue quarter in history in Q1 2025, surpassing $500 million, driven by strong client engagement, market share gains, and broad-based volume growth across asset classes and client sectors.
• The company's proprietary electronic trading technology, including AIX, RFQ Edge, and advanced portfolio trading capabilities, provides a significant competitive advantage by enhancing execution efficiency, price discovery, and workflow automation for clients.
• Strategic acquisitions like ICD, r8fin, and Yieldbroker have successfully expanded Tradeweb's multi-asset network, geographic reach, and client channels (adding Corporates), contributing meaningfully to recent revenue growth and future opportunities.
• Despite ongoing market volatility and geopolitical uncertainty, Tradeweb is capitalizing on the secular trend of electronification and the return of private sector intermediation, positioning itself for continued growth and margin expansion in 2025, supported by planned investments in technology and strategic initiatives.
• Key risks include potential impacts from market volatility, regulatory changes, credit risk, and obligations under the Tax Receivable Agreement, which require careful management despite the company's strong liquidity position.

Setting the Scene: A Leader in Electronic Market Evolution

Tradeweb Markets Inc. stands as a prominent operator of electronic marketplaces, connecting a global network of over 3,000 clients across institutional, wholesale, retail, and corporate sectors. The company facilitates trading across a diverse range of asset classes, including rates, credit, equities, and money markets, providing essential pre-trade, execution, post-trade, and data services. Its overarching strategy is deeply rooted in the ongoing electronification of financial markets, a secular trend driven by the persistent demand for greater transparency, enhanced execution quality, operational efficiency, and reduced costs.

Tradeweb's history is one of continuous innovation and expansion, evolving from its origins as TWM LLC to its current structure as a holding company following the 2019 IPO. Key acquisitions, such as NFI (eSpeed), Yieldbroker, r8fin, and most recently ICD, have been instrumental in broadening its market footprint, product suite, and client base. This expansion is not merely additive; it is strategically designed to leverage the interconnectedness of global financial markets and position Tradeweb as a comprehensive, multi-asset platform.

In the competitive landscape, Tradeweb operates alongside major players like MarketAxess (MKTX), Intercontinental Exchange (ICE), and CME Group (CME). While MarketAxess holds a strong position in electronic credit trading, and ICE and CME are dominant in derivatives and broader exchange operations, Tradeweb differentiates itself through its multi-asset class breadth, deep client relationships across diverse sectors, and a technology-first approach that emphasizes workflow solutions and data analytics. The company's strategic focus on maintaining a balanced ecosystem that serves both buy-side and dealer clients is a core tenet that shapes its competitive interactions and market positioning.

Technological Innovation and Differentiation

At the heart of Tradeweb's competitive strength lies its proprietary technology platform. This technology is not just about facilitating trades; it is designed to enhance the entire trade lifecycle, providing clients with sophisticated tools for price discovery, optimal execution, and efficient post-trade processing. The platform's architecture supports a variety of trading protocols, including Request-for-Quote (RFQ), streaming, sessions-based trading, and the increasingly important portfolio trading.

Tradeweb's investment in technology is substantial, with over $780 million invested in the last nine years, reflecting an average annual growth rate of 15%. This investment fuels initiatives like the development and enhancement of its Automated Intelligent Execution (AiEX) protocol, which saw average daily trades increase significantly in Q1 2025, particularly in institutional US Treasuries (up 15% YoY) and global credit (up over 15% YoY). The company's RFQ Edge offering in credit, which provides real-time analytics, charting, and execution cost analysis directly within the RFQ ticket, is another example of leveraging technology to improve client experience, with over 25% of RFQ users utilizing the tool shortly after its rollout. Portfolio trading, a protocol where Tradeweb has established a leading position, continues to see growing adoption and record trade sizes, demonstrating the platform's capacity to handle complex, multi-line item transactions efficiently.

Beyond core trading functionalities, Tradeweb is actively exploring emerging technologies, including digital assets and blockchain. Investments in entities like the Canton Network and Alpha Ledger are aimed at understanding and potentially leveraging distributed ledger technology to create a more efficient and democratized ecosystem. Management sees potential for blockchain to enhance efficiency in settlement processes, particularly in markets like repo and TBA mortgages. While these are longer-term initiatives, they highlight Tradeweb's commitment to staying at the forefront of technological evolution and identifying new avenues for growth and efficiency gains. This continuous technological development and application are critical to Tradeweb's competitive moat, enabling it to offer superior execution quality and workflow solutions that drive client adoption and contribute to its strong financial performance.

Competitive Dynamics and Positioning

Tradeweb operates in highly competitive markets, facing established exchanges and electronic trading platforms. Its strategy is to leverage its multi-asset, multi-client, and global footprint, underpinned by its technology, to gain market share and expand its wallet share with existing clients. In institutional US Treasuries, Tradeweb has demonstrated significant competitive strength, achieving a market share exceeding 50% versus its main electronic competitor (Bloomberg) for the fourth consecutive quarter in Q1 2025. This leadership is supported by strong adoption of its streaming and AIX protocols.

In the competitive credit market, Tradeweb has made substantial inroads, gaining 1100 basis points in fully electronic market share since 2019. The company is strategically evolving its credit pricing model, introducing subscription fees and increasing minimum floors with certain dealers. This shift, while modest in Q2 2025 with an expected $6-$7 million increase in fixed revenues offset by a corresponding decrease in variable fees, is intended to create a mutually beneficial model that incentivizes long-term growth and innovation in partnership with dealers. Management views the entry of technology-oriented market makers like Citadel into credit as positive, believing it will increase market velocity and create opportunities for Tradeweb as a platform connecting diverse liquidity providers.

Compared to MarketAxess, which is primarily focused on credit, Tradeweb's broader asset class coverage offers diversification benefits. While MKTX may hold a larger share in specific credit segments, Tradeweb's integrated platform and cross-asset capabilities provide a differentiated value proposition. Against larger exchange operators like ICE and CME, Tradeweb competes effectively in specific electronic trading segments by focusing on client-centric workflows and specialized analytics, often demonstrating superior execution efficiency in its core markets. The company's continued investment in technology, including its Aladdin integration efforts in credit, is aimed at enhancing its competitive standing and capturing further market share, particularly in areas like high yield where it sees significant growth potential.

Financial Performance Analysis

Tradeweb delivered a robust financial performance in the first quarter of 2025, marking a significant milestone with record revenues of $509.7 million, a 24.7% increase compared to the prior year period (25.8% on a constant currency basis). This performance reflects strong underlying business momentum and successful execution of its growth strategy. The growth was broadly distributed across asset classes, with Rates revenue increasing by 24.0% to $265.4 million, Credit revenue up 7.0% to $124.0 million, Equities revenue rising 16.1% to $31.4 million, and Money Markets revenue surging 160.3% to $43.7 million, significantly boosted by the ICD acquisition. Market Data revenue also saw strong growth, increasing 33.4% to $38.7 million, partly due to periodic delivery of historical data sets to LSEG (LSEG).

Revenue growth by client sector mirrored this broad strength. Institutional revenue grew 24.6% to $308.1 million, Wholesale revenue increased 5.2% to $102.3 million, and Retail revenue was up 2.1% to $35.9 million. The newly established Corporates sector, following the ICD acquisition in August 2024, contributed $24.7 million in revenue during the quarter. International revenues also saw significant growth, increasing 37.0% year-over-year and contributing 40% of total revenues, highlighting the success of the company's global expansion efforts.

Total expenses increased by 26.8% to $305.6 million, driven by higher employee compensation and benefits (up 23.6% due to incentive compensation and headcount growth, including ICD), increased depreciation and amortization (up 27.1% primarily from acquired assets), higher technology and communications costs (up 34.8% due to data strategy investments and increased volumes), and higher general and administrative expenses (up 81.9%, impacted by foreign exchange losses). Despite the increase in expenses, Tradeweb expanded its Adjusted EBITDA margin by 88 basis points compared to Q1 2024, demonstrating its ability to balance investment for growth with profitability. Net income attributable to Tradeweb Markets Inc. increased 17.6% to $148.4 million, resulting in diluted EPS of $0.69.

Liquidity and Capital Management

Tradeweb maintains a strong financial position, ending the first quarter of 2025 with $1.31 billion in cash and cash equivalents. The company generated approximately $834 million in Free Cash Flow over the trailing twelve months, indicating robust cash generation from its core operations. While net interest income decreased in Q1 2025 due to lower average interest rates and cash balances (following the ICD acquisition payment), the company has no outstanding borrowings under its $500 million unsecured revolving credit facility as of March 31, 2025, providing ample financial flexibility.

The company's capital allocation strategy prioritizes organic investment in the business, followed by strategic M&A, share repurchases, and dividends. In Q1 2025, cash used in investing activities primarily related to capitalized software development ($13.2 million) and capital expenditures ($1.6 million). Cash used in financing activities included payroll tax payments related to stock awards ($46.1 million), cash dividends ($25.6 million), and distributions to non-controlling interests ($7.4 million).

A significant obligation is the liability under the Tax Receivable Agreement, totaling $369.8 million as of March 31, 2025, with approximately $18.4 million expected to be paid within the next 12 months. These payments will reduce cash flows otherwise available, although they are offset by expected tax savings. The company's share repurchase program has $179.9 million remaining under its authorization, providing flexibility for opportunistic buybacks and offsetting dilution from stock-based compensation. Tradeweb's regulated subsidiaries maintain capital well in excess of minimum requirements, ensuring operational stability and client confidence.

Outlook and Growth Trajectory

Tradeweb's outlook for 2025 reflects confidence in continued business momentum and opportunities for growth, balanced with strategic investments. The company expects adjusted expenses to range from $970 million to $1.03 billion, representing an increase driven by accelerated investments in key growth areas (credit, rates, emerging markets, ICD integration) and higher occupancy costs related to the New York City headquarters relocation. Despite these investments, management anticipates driving modest adjusted EBITDA margin expansion compared to 2024, leveraging the scalability of its platform and anticipated healthy revenue environment.

Capital expenditures and capitalized software development are projected to be between $99 million and $109 million for fiscal year 2025, a 17% increase at the midpoint versus 2024, largely due to the one-time spend associated with the NYC headquarters move. Excluding this impact, core CapEx growth is projected at approximately 3%. Revenue generated under the master data agreement with LSEG is expected to be approximately $90 million in 2025.

Management's commentary on April 2025 trends indicates continued strong performance, with overall revenue growth trending approximately 30% higher year-over-year and average daily revenue trending higher than the first quarter. This momentum is broad-based, with double-digit volume and revenue growth across all four asset classes. The company remains focused on expanding its electronic ecosystem, both organically through protocol enhancements and geographic expansion (e.g., EM credit initiatives in Saudi and India), and inorganically through strategic acquisitions like ICD, which opens the corporate treasury market and offers cross-selling opportunities (e.g., making US Treasuries available on the ICD platform in H1 2025).

Key Risks and Challenges

While Tradeweb's growth trajectory appears strong, several risks could impact its performance and the investment thesis. The business is highly sensitive to overall market activity, trading volumes, and volatility, which can fluctuate significantly due to macroeconomic factors, central bank policies, and geopolitical events. A sustained period of low volatility or adverse market conditions could negatively affect transaction-based revenues.

Extensive regulation in the financial services industry poses ongoing compliance costs and risks. Changes in regulations, such as those impacting capital requirements for banks or trading mandates, could alter market structure and impact client trading behavior on Tradeweb's platforms. Cybersecurity threats are a persistent risk, with potential breaches impacting platform reliability, client trust, and operational costs.

Credit risk exposure to financial institutions and on failed settlement transactions, although managed through monitoring and collateralization, remains a potential vulnerability, particularly during periods of market stress. Finally, the obligation to make significant payments under the Tax Receivable Agreement over the next 15 years will reduce cash flows, requiring careful liquidity management.

Conclusion

Tradeweb Markets delivered a landmark first quarter in 2025, achieving record revenues and demonstrating robust growth across its diversified electronic marketplaces. The company's core investment thesis is firmly rooted in the secular trend of electronification in global financial markets, a trend it is actively shaping through continuous technological innovation and strategic expansion. Its proprietary technology, enabling efficient execution and sophisticated analytics, provides a critical competitive edge against rivals like MarketAxess, ICE, and CME, driving market share gains in key areas like institutional US Treasuries and credit.

Strategic acquisitions, notably ICD, have successfully broadened Tradeweb's ecosystem, adding new client channels and product capabilities that contribute to revenue growth and future opportunities. While market volatility and regulatory changes present ongoing challenges, Tradeweb's diversified platform, strong client relationships, and planned investments position it to capitalize on evolving market dynamics and continue its growth trajectory. The company's outlook for 2025 signals continued investment to support organic growth and modest margin expansion, reinforcing its commitment to balancing profitability with long-term strategic development in the competitive electronic trading landscape.