Good morning, and welcome to Tradeweb's First Quarter 2020 Earnings Conference Call. As a reminder, today's call is being recorded and will be available for playback. To begin, I'll turn the call over to the Head of U.S. Corporate Development and Investor Relations, Ashley Serrao. Please go ahead.

Thank you, and good morning. Joining me today for the call are our CEO, Lee Olesky, who will review the highlights for the quarter and provide a business update; our President, Billy Hult, who will dive a little deeper into some growth initiatives; and Bob Warshaw, our CFO, who will review our financial results. Our first quarter earnings release, accompanying presentation and April volumes report are available on the Investor Relations portion of our website. 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, including 2020 guidance and the COVID-19 pandemic, the potential impacts of which are inherently uncertain 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 the forward-looking statements is contained in our earnings release and periodic reports filed with the SEC. In addition, on today's call, we will reference certain non-GAAP measures. Information regarding these non-GAAP measures, including reconciliations to GAAP measures, are in our posted earnings release and presentation. Lastly, we provide certain market and industry data, which is based on management's estimates and various industry sources. See our posted earnings presentation for more details. To recap, this morning's results were consistent with our recent earnings preannouncement. Specifically, we reported GAAP earnings per diluted share of $0.25. Excluding certain non-cash stock-based compensation expense, acquisition and Refinitiv-related D&A and certain FX items, and assuming an effective tax rate of 22%, we reported adjusted net income per diluted share of $0.37. Please see the earnings release and the Form 10-Q to be filed with the SEC for additional information regarding the presentation of our historical results. Now let me turn the call over to Lee.

Thanks, Ashley. Good morning, everyone, and thank you for joining our first quarter earnings call. Before we begin, we'd like to acknowledge this extraordinary crisis, which is unlike anything we've ever experienced before. The human suffering and loss is immense, and our thoughts are with all the medical and other essential professionals on the front line and those impacted by the pandemic globally. For Tradeweb, this is the first time that a significant number of market participants in our 950-plus employees in every region of the world in which we operate have been working remotely. Our clients' amazing ability to shift trading and risk management to a virtual environment and during a period of immense volatility is a testament to the rapid evolution of Wall Street driven by investments made to digitize the trading life cycle. But there remains plenty of room to do even more. We expect these investments to accelerate as risk management playbooks are rewritten and inefficient manual processes are heavily scrutinized. Not having a robust and tested electronic trading strategy is no longer an option in this new era for trading. We are already seeing clients who have cautiously made investments in electronic trading demonstrate renewed enthusiasm for the efficiencies that our arsenal of solutions is able to provide across asset classes. As the market gradually stabilizes, Tradeweb has transitioned back from solely focused on helping our clients’ trade significant risk and ensuring system stability in March to actively developing and selling our innovations in April and so far in May. We believe a key factor leading to market stabilization has been the effort of central banks globally who are using the government bond markets to finance their support of the fixed income ecosystem and, of course, the broader economy. We believe our solutions at Tradeweb…

Thanks, Lee. And let me also start by acknowledging the human toll of this pandemic. Our thoughts and prayers are with all those impacted. As Lee mentioned earlier, we were able to shift swiftly and successfully to working remotely, and we are very fortunate to have a business model that can make this transition and still thrive by serving our clients. Innovation has been and will continue to be the key to our success going forward. At a high level, as extreme volatility gripped the markets in March, we saw a flight to quality liquidity, where our customers sought to transact against the best prices available. We also saw a flight to safety where our customers used all the tools at their disposal to make their workflows less risky and safer. Auto-execution waned especially in illiquid asset classes as auto-quoting capabilities were paused across dealer desks. While absolute volumes increased year-over-year during the first quarter, we saw the percent of institutional trades executed via AiEX dropped to 17% in March and over 25% in January and February. Looking ahead, as market conditions continue to improve following various ongoing and looming Fed actions, we believe AiEX will continue to grow in the future and remain a critical tool. We have already started to see a recovery in European AiEX usage in April. And given the global nature of these institutional clients, U.S. activity has picked up meaningfully recently. In this work-from-home environment, we have become the virtual Street, meeting customers where they are and helping them manage meaningful amounts of risk. Our sales force and product teams are very engaged with our clients as much as possible the Tradeweb experience our customers had at their trading desks is the experience they are getting at home. It is also changing how people…

Thanks, Billy, and good morning. Let me start by also taking a moment to acknowledge the tragic human loss and thank everyone working to help us get through all of this. I would also like to thank my team who closed our books seamlessly in a remote environment this quarter. As we indicated, our continued year-over-year growth in volumes, revenue, earnings and improved margin in the first quarter of 2020 as well as our volumes in April continue to give us confidence that by providing sustained value for our clients, we also are creating sustained value for our shareholders. As I go through the numbers, all comparisons will be to the prior year period, unless otherwise noted. Let me begin with an overview of our volumes on Slide 9. We reported record quarterly ADV of $898 billion, up 39%. And as you can see, the growth was broad-based. Our organic growth initiatives powered the bulk of the quarter, especially in January and February. On the one hand, in March, our organic efforts were amplified by seasonal strength in our derivatives products. On the other hand, the impact of volatility was mixed. In some markets like ETFs and to a certain extent, derivatives, volatility helped amplify our share gains. In other markets, extreme volatility and the imbalance between selling and buying interests, especially in more illiquid markets, providing its own set of challenges. With that said, we believe the diversity of our business is one of our strengths, and we continue to invest to capitalize on the opportunities ahead of us. During the quarter, we saw ADV records in U.S. and European government bonds, mortgages, swaps greater than one-year in duration, global cash credit, credit derivatives, equities and repo. Slide 10 provides a summary of our quarterly earnings performance. The strong…

Thanks, Bob. As I noted in my recent shareholder letter, the future for Tradeweb is bright. We have an exciting plan that we are executing against across our asset classes, and our diversity affords us a variety of opportunities to improve client workflows. Driving strong revenue growth and balancing associated investments with margin expansion continues to be our top priority. Today's additional fee per million disclosure should help shed more light on the drivers of our double-digit revenue growth and illuminate the vast potential we see for our rates and our credit business. We think we are very well positioned to capitalize on what we believe will be an acceleration in electronification coming out of this pandemic. The momentum we saw to start the year has continued into the beginning of the second quarter, with April volumes increasing 15% year-over-year with broad-based growth across our four asset classes. The rates markets are in substantially better shape than March, and the credit markets are improving gradually as market function improves. I'd like to conclude my remarks by thanking our clients for their business and partnership in the quarter. And I want to especially thank my colleagues for their efforts that have contributed to our strongest first quarter in our history under very difficult circumstances. With that, I'll turn it back to Ashley for your questions.

Thanks, Lee. As a reminder, please limit yourself to one question only. Please feel free to hop back in the queue and ask additional questions at the end. Q&A will end at 9:30 Eastern Time. Operator, you can now take our first question.

Thank you, sir. And our first question comes from the line of Jeremy Campbell from Barclays. Please go ahead.

Hey, thanks. And I hope you guys are all well. Lee, I'm just wondering how you've seen the client base grow or evolve in this work-from-home environment. I imagine maybe like the demand for electronic offerings from existing customers under remote working conditions has increased. But I also wanted to get a sense of what new client wins look like in this environment.

Hey, good morning, Jeremy. Thanks for the thoughts and the question. I hope you're doing well, too. So yes, look, electronification is a multiyear secular trend, right, those benefits, we've all been aware for some time. What I would say is, sometimes you have catalysts that accelerate things. And in my career, doing this for a while now, the first catalyst was tech innovation, literally the Internet in the 1990s, then we kind of fast-forward into some regulatory post 2008. We saw that as an accelerant. And candidly, right now, it's obviously a different dynamic, but we have another significant change that's going to accelerate things. So the work-from-home environment is – we're not going to snapback to the way things were. I've said that repeatedly, and I feel very strongly about it. To answer your question more specifically, yes, we're adding clients, we're adding users. We're very pleased with that. I think when you really break it down, March was just a – was different from April, which is – even in May, now we're seeing some more changes to the environment. We've got a number of wins. I mean, you saw our volumes for April. So April was a very strong month for us as what I would suggest as things started to normalize a bit, whatever the new normal is. But we've added activity in institutional and munis with respect to clients looking for alternatives to voice. We've seen more of an uptake in specified pools as people move from chat to E. Billy mentioned this increase on the credit side, significantly increased interest in net-spotting, which reduces manual booking and hedges trades in volatile time, but also it's just an easier process for everybody, same thing with the portfolio trading, which has surged. In repo, we've got more STP functionality. So we're – look, we're seeing increased demand, and we're seeing an acceleration kind of across the board. But every month and every day, in some respects, is some new lessons that we're picking up. But we're very pleased with how we've performed as a company.

Great. Thanks.

Sure.

Our next question comes from Ari Ghosh from Credit Suisse. Please go ahead.

Hey, good morning, everyone. So Lee, maybe you can take this. You touched on your tech-heavy nimble business model. So just could you talk maybe about new launches that have either enhanced platform functionality and products to help customers navigate this crisis? And then related to that, could you also touch on how COVID-19 has impacted new product development and key initiatives for 2020, just given that folks are not in the same vicinity and some technicals might be more challenging? Thanks.

Right. Thanks, Ari. Yes. So look in some ways, all the things we do are designed to simplify workflows. We've obviously made some specific changes as a result of the current environment we find ourselves in. I say this a lot. We're putting our people first, the safety of our folks, and we're trying to figure out second, where we can help clients. And so we've put in a number of enhancements to help the customers essentially work from home in this environment. We've built out some functionality that's allowed us in real-time to change tolerance parameters. We've put in some changes that ensure the dollar-denominated notes are capable of trading at negative yield, if need be. Hopefully, we don't get there, but we're ready for that, should – changed some protocols to ensure the participants have enough time to respond in the work-from-home environment, obviously. The interesting thing about this environment is we're all experiencing the same thing at the same time. So I think we can all relate on some level to navigating this incredibly different environment that we're doing our jobs in. And I'm standing here at my desk and trying to fit everything on the desk, which is a lot more than the desk I'm used to with all the devices and the cords all over the place. So we're all experiencing the same thing. So we've made changes to user interface to help clients have just a better work-from-home experience in terms of what's on their monitors, those sorts of things. We're actually, though – in terms of kind of new things, new product development, we really in – we've moved into another phase, really the first month in March, we moved all our developers, all our – whole tech team, 300-plus people, to focus on stability, given the surge in volume and just making sure that everything was working and we could all work remotely. We've kind of gotten into the second phase in – really in April and obviously in May already, and we're focusing on delivering new services, new products. We actually put in a release in the last week or so. We stayed away from doing that obviously, in March because it was such a stressful environment for everybody led by the markets. But we're back to innovating, have been for some time, and we're doing a number of things just to make it easier for our clients to function in this environment.

Great. Thanks.

Sure.

Thank you. Our next question comes from Rich Repetto from Piper Sandler. Please go ahead.

Hey, good morning, Lee. Good morning Billy, and Robert. First, I'm glad you made the conversion, and everyone is healthy and safe here. I guess, trying to pull together some of these questions. But the thing that strikes me more than anything on the call is how diverse your business is, as Billy ran through the different products and so forth and the initiatives. So I know this is a tough question. But to pull this all together, could you just maybe highlight, which you see as the two most impactful initiatives or products over the next 12 to 18 months, given the current market environment and maybe the two areas or products that you're concerned because market conditions have changed?

Yes. It's a great question, Rich. And obviously, it's something we've been very, very focused on trying to assess what occurred in March, what happened in April, even what's happening day-to-day now in May. And we are reorienting around the edges. We have technology schedules for six to nine months out, even longer. We've got a lot of people developing different things. How do we reorder things in order to seize the opportunity, both short-term, medium-term and not to give up on the long-term stuff. Most impactful, I don't really think that that's a significant change from what you heard from us in the past and really what comes out when you look at our numbers, our most recent ones in April. We're focused on where we can control investing for organic growth. That's always where there are things that can be digitized and electronify more quickly or where there is a lot of share that we can grab from voice transactions in phone or where we think we can have competitive advantages versus other platforms. So for us, we've had a huge focus, and Billy went through some of this, one of the reasons we tried to give a little more detail in our business on the price per million and focusing on the swaps and new sort of derivatives versus the cash business split was to sort of show, "Hey, this is in rates." Yes, there's going to be a huge surge of issuance. And so obviously, there's a lot to play for with respect to how that gets distributed and traded after the fact. So government bonds, it's shocking, the numbers, I don't know, 3x or 4x the issuance that we saw last year. So we think that there's clearly going to be more activity in that…

Thanks, Lee. Thank you.

Thank you. Our next question comes from Alex Kramm from UBS. Please go ahead.

Yes. Hey, good morning everyone. Just wanted to – I appreciate that the – most of the growth of the business is clearly structural and secular as you obviously outlined here multiple times. But can you just go back to the cyclical side a little bit. Lee, you mentioned, obviously, the zero interest rate environment or quantitative easing. And you just touched upon a little bit again. But just – can you just outline what you expect to happen? I know we have a lot of issuance, but also, obviously rate volatility has already come down. So how does – how do all these factors impact different parts of your business, your cash business, your derivatives business, your swaps business, obviously? And then maybe just lastly on that whole theme, how are some of these products that may or may not be affected different in terms of variable versus fixed pricing? I guess what I'm trying to get is like, depending on how this shakes out, how does it really impact your P&L?

Right. Well, what I would – I guess the way I would answer that is the biggest factor in all of this is the secular point that we're making. It's so hard to predict, obviously, what's going to happen in the rate situation, let alone, how that will impact volumes. We've got such a unique situation that we're dealing with. I think the best thing I can say is look a little bit at our history, right? We've been through multiple, multiple cycles in this business over 20 years. And in Europe, we've had negative rates for – Europe's like – our international business is like a third of our revenues, and that business has been in a negative environment for years now. And honestly, going back post crisis like 2008, 2009, as we saw things starting to move towards a negative situation, I definitely had that question in my mind. What is going to happen to our business? And you know what our business has thrived because firms need to adjust their duration. They need to digest and distribute in all of these markets. And I think, bluntly, the markets that are being influenced most directly by the central banks. They're right under our umbrella, right? So this is our world. This is – first and foremost, government bonds, rates markets, and it spreads out to credit markets for sure, too. There's going to be a lot more massive amounts of issuance. So generally, we're pretty optimistic about what the impact is going to be, but we sure don't want to project with respect to specifics on the short run at all. But there's – I mean, it's not so insightful to say the amount of U.S. treasury outstanding is going to increase massively. And it's going to need…

No. Absolutely, great color. Thank you.

Thanks.

Our next question comes from Alex Blostein from Goldman Sachs. Please go ahead.

Great, thanks. Good morning. Thanks for taking the question. A question for Billy, just around the credit market dynamics, and you guys gave a good amount of detail on this already. But I was hoping you could talk a little bit about sort of lessons learned from the crisis so far with respect to acceleration in electronification of credit markets specifically, and sort of your efforts there? And then separately, if you look at the market share trends in the kind of fully electronic side of the equation, they've slowed down a bit over the course of March and April. So maybe a little more color on what went on there as well would be helpful. Thanks.

Sure. Hey, Alex. We mentioned something interesting, which was basically like we're not kind of going back to where we were, and this has been such of big – kind of a moment. Interestingly, I'm going to kind of hit you, Alex, with a very kind of almost like similar refrain, which is one thing that we learned kind of loud and clear through March and through April is something that you've heard me say before, which is the market 100% wants competition and is willing to support competition. You've also heard me speak pretty loudly about portfolio trading. And if you can think about what happened through March and into April now around this kind of like search for liquidity in the market, it's a moment in time where an innovation that we have, quite honestly, been on the forefront of around portfolio trading has found like a moment in time where it's going to resonate with our client base at that highest level. And so when we look at what we're doing in credit, we feel so good about how we are creating these innovations for clients, and so that's been a real kind of trend and a real lesson learned. As we kind of look back around March and April and you've kind of heard some of these big stats from us like records out of Europe, a single record trade in the month of April around portfolio trading, this is a moment where you've heard me describe that kind of light bulb effect with clients, it's like louder than ever now, brighter than ever now. So that's a big deal. As much as you learn things from a moment in time, we try not to kind of overdo it. And you heard, Lee, talk about our session trading. And we – that's something that we've always been in the front of. And in that moment, that didn't work as well through March. It's definitely picked back up as markets have gotten more normalized in April, and we feel really good about where we are position-wise there. So generally speaking, it's like we are kind of leading the innovation in credit and feel really good about where we are. And thanks for your question, Alex.

Thank you.

Thanks for your question Alex.

Thank you. Our next question comes from Kyle Voigt from KBW. Please go ahead.

Hi, good morning. Thanks for taking my question. Maybe a question for Billy, obviously, there were some liquidity issues in the cash treasury market during certain periods, especially in late March. So my question is really a regulatory question related to this. Do you think there is regulatory interest in revisiting U.S. cash treasury market structure once we've moved past the pandemic? And if so, I realize that we're still really early days here. But do you have any suggestions for how market structure can be adjusted to tackle those liquidity issues going forward?

That's a good question. I mean, it would be almost impossible – I think nothing is going to surprise us in terms of kind of like what we've learned from what happened in March and April. So I don't have like an absolute answer for you on like, yes, this will happen. We've always been, I think an important voice around regulation. And as that develops, we will continue to have a large voice around that. I think – listen, I think that the role of non-primaries in the government space is going to kind of increase. And we've always had a strategy of making sure that those non-primaries had an important place in our ecosystem. So I think that that's an important thing to kind of keep in mind. And I think things will develop from this moment, and we're going to play a leadership role in terms of how it develops, and we're going to make sure our voice is kind of loud around to continued development of the ecosystem.

Thank you.

Thank you. Our next question comes from Ken Worthington from JPMorgan. Please go ahead.

Hi. Good morning and thank you for taking my question. I think we're dancing, some of us, around the same issue. In the world of ultra-low rates, maybe where have you or where do you expect to position product development differently than you would if the U.S. and the rest of the world were in a more normal or higher rate environment? Maybe said differently, do you shift product development and investments given the knowledge that we're probably in a zero rate environment for the foreseeable future?

Okay. Let me take a crack at that, and thank you for the question. So yes, I mean, this is clearly something I sort of got it a little bit before. Let me see if I can do a better job. We've lived through negative rates in Europe now for years. And so we've learned quite a bit about how it impacts markets and trading. And from a Tradeweb, I'm going to give a Tradeweb perspective, we've managed incredibly well, and there's been significant increase in our business in govi bonds and in euro-denominated swaps. So that business has just continued to grow. We're always looking at what should we be prioritizing based on the current situation. As Billy was saying, we're not going to try to kind of jump from one thing to another, but we are a fairly nimble organization. You're talking to the guys who started the company with two people and grown to this size. And so we are – Billy, and I and Bob, we're very involved in prioritization of business and what we're going to do next, and we speak regularly with the market and our entire organization. We're very connected. So we're assessing constantly where is the next opportunity, which we'll be doing next. At the same time, extending where we are is critical. And so we expect there will be some bits of functionality, bits of things that we'll do a little bit differently. But a very low rate environment, 10, 15 years ago would have made me much more nervous than it does today. Right now, this whole distribution of massive amounts of debt is going to be a huge deal. And I think as much as the short end is really going to zero, essentially, we – most of our…

Fair enough. Thank you very much.

Our next question comes from Chris Harris from Wells Fargo. Please go ahead.

Great. A question for Bob, how are you thinking about capital allocation at this point, no debt on the balance sheet, a larger float, sort of stock buyback something that might make more sense now than they have previously? And can you give us an update on your thoughts on M&A in this environment?

So let me tackle the first part, and maybe leave the second to Lee. In terms of our capital management, we're doing what you expect us to do, which is we think this is an interesting environment to continue to look at opportunities. So maybe I'll get to the second half first, but [indiscernible] opportunity. So we're paying a dividend. So we're returning some money to shareholders. We don't really think it's the right time still for a buyback because of still somewhat limited in terms of our stock. And the third one, we are continuing to look at opportunities. And we think it's really interesting time to be looking at opportunities. We think it's really important to be not only gathering cash to be – so we can be quick at it. And that we obviously have a $500 million line of credit that we haven't drawn to add to that. But we think it's pretty important to be [indiscernible] and quick if we see an opportunity that will be [indiscernible] and we continue to look at them in this sort of new environment that assets are in.

So what did you leave for me there, Bob? Was it...

Not much.

Yes. I mean, I know we're running late here. So Chris, let me just say, we've got a global corporate development team led by Simon Maisey. Ashley is the guy in North America. We're talking all the time. We're looking at things. We're evaluating opportunities. We believe the space is going to continue to consolidate. We want to participate. Right now, pricing is, I think, going to continue to be a little bit challenging, given just what's going on in the market. But we're looking at opportunities. And if we see ones that make sense for us, we will see them. We will not hesitate to see them and move forward. I've said this before, but if you look at the history of the company, we've been mostly organic, but we've done four or five acquisitions over the years. And where we think we can buy something more and integrate it more efficiently than building it, we're going to do it. And we do have a strong position. You're right to point that out in terms of cash and in terms of access to lines of credit.

Thank you.

Thanks.

Our next question comes from Mike Carrier from Bank of America. Please go ahead.

Hi, good morning. Thanks for taking the question. Just one on the strategic front and how it impacts expenses and M&A. Lee, you mentioned upfront that sometimes we get these big catalysts that change behavior with technology and then regulation and now this work from home. When you get these catalysts that can fuel transitions in industries and structural growth, do you see the potential for shifts either it's in investments or M&A opportunities in areas that maybe initially you thought you could build out maybe better now to get there faster?

Yes. Thanks, Mike for that. So look, it's such a tough environment for all of us. I don't want to sound obnoxious candidly. But having built a couple of businesses, this kind of seismic change is – creates significant opportunity, right? It's unique. It's a different set of circumstances than we experienced with the Internet in the 1990s or regulation in the 2000s or even more recently. This is a whole different thing. But for people who are innovative, creative, it does really get you thinking about where you can deliver value to your clients. And I think you're right to point out, it probably opens up our eyes a little bit more broadly, but we're still going to be disciplined. We're always – that's our nature. That's what we've done as a company. We've been incredibly disciplined over all of these years. And we're only going to do things that we think makes sense. We know folks view us as a growth business. They also care about margins. And so we'll be disciplined, but it's a very interesting time. And especially – look, for Tradeweb, we've been so fortunate, right? We went public a little over a year-ago, boy, that was a timing-wise fortunate relative to where we are today. We built our business to the point where we have. And we've distributed it from home. We're working remotely as a digital company with software engineers and people using all the tools that we're out to people. So yes, I think there's a lot of opportunity that's going to be out there in front of us, and we're going to work really hard to make the right decisions and move in the right direction.

Thanks a lot.

Yes.

Thank you. This concludes our Q&A session. At this time, I'd like to turn the call over to Mr. Lee Olesky, CEO, for closing remarks. Please go ahead.

Well, thanks. Well, I know we're running late. You guys – it always amazes me how much you guys cover and do in a day. So I don't want to take up more of all your time. We really appreciate you joining us. We wish you the best in these very challenging times, and we appreciate you spending the time with us this morning. So thanks a lot, guys. Take care.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.