Second Quarter Financial Highlights*

  • Record revenues of $125.5 million, up 17.3%
  • Operating income of $60.9 million, up 17.0%
  • Diluted EPS of $1.27, up 18.7% from $1.07
  • Record trading volume of $527.0 billion, up 25.3%
  • Record trading volume in U.S. high-yield, Eurobonds and emerging market bonds
  • Open TradingTM volume of $130.7 billion, up 46.0%

*All comparisons versus second quarter 2018.

NEW YORK, July 24, 2019 (GLOBE NEWSWIRE) -- MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for fixed-income securities, and the provider of market data and post-trade services for the global fixed-income markets, today announced results for the quarter ended June 30, 2019.

"Trading volumes remained strong across all product categories and regions as dealer and investor adoption of electronic trading continues to accelerate,” said Rick McVey, Chairman and CEO of MarketAxess. “We set new quarterly records for trading volumes in U.S. High Yield, Emerging Markets and Eurobonds, three product areas that are benefiting from growth in Open Trading.   We are especially encouraged by the strong demand we are seeing for new trading automation tools in credit markets by both our dealer and investor clients.”  

Second Quarter Results

Total revenues for the second quarter of 2019 increased 17.3% to $125.5 million, compared to $107.0 million for the second quarter of 2018.  Operating income was $60.9 million, compared to $52.0 million for the second quarter of 2018, an increase of 17.0%. Operating margin was 48.5%, compared to 48.6% for the second quarter of 2018.  Net income totaled $48.1 million, or $1.27 per share on a diluted basis, compared to $40.5 million, or $1.07 per share, for the second quarter of 2018.  

Commission revenue for the second quarter of 2019 increased 18.7% to $114.1 million, compared to $96.1 million for the second quarter of 2018. Variable transaction fees increased 26.7% to $90.8 million on total trading volume of $527.0 billion for the second quarter of 2019, compared to variable transaction fees of $71.7 million on total trading volume of $420.8 billion for the second quarter of 2018. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 18.7% for the second quarter of 2019, compared to an estimated 17.4% for the second quarter of 2018.

All other revenue, which consists of information services, post-trade services and other revenue, increased to $11.4 million, compared to $10.9 million for the second quarter of 2018.  The increase in all other revenue was principally due to higher revenue from data sales and post-trade services, partially offset by the unfavorable impact of the stronger U.S. dollar of $0.4 million.

Total expenses for the second quarter of 2019 increased 17.6% to $64.6 million, compared to $54.9 million for the second quarter of 2018. The increase in total expenses was largely due to higher employee compensation and benefit costs, mainly due to an increase in headcount, of $6.4 million, general and administrative costs of $1.1 million, professional and consulting fees of $0.9 million and technology and communications expense of $0.7 million. 

Other income increased to $2.0 million, compared to $1.2 million for the second quarter 2018.  The increase in other income is principally due to a $0.7 million increase in investment income as a result of higher investment balances and interest rates.

The effective tax rate for the second quarter of 2019 was 23.5%, compared to 23.9% for the second quarter of 2018.   

Employee headcount was 480 as of June 30, 2019 compared to 431 as of June 30, 2018.

Dividend

The Company’s board of directors declared a cash dividend of $0.51 per share of common stock outstanding, to be paid on August 21, 2019 to stockholders of record as of the close of business on August 7, 2019. 

Share Repurchases

A total of 12,850 shares were repurchased in the second quarter of 2019 at a cost of $3.5 million.

Balance Sheet Data

As of June 30, 2019, total assets were $812.0 million and included $518.1 million in cash, cash equivalents and investments.  Total stockholders’ equity as of June 30, 2019 was $661.9 million.

Non-GAAP Financial Measures and Other Items

To supplement the Company’s unaudited financial statements presented in accordance with generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP measures of financial performance, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) and free cash flow.  The Company believes that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in understanding the Company's operating results.  See the attached schedule for a reconciliation of GAAP net income to EBITDA and GAAP cash flow from operating activities to free cash flow.

Webcast and Conference Call Information

Rick McVey, Chairman and Chief Executive Officer, Chris Concannon, President and Chief Operating Officer and Tony DeLise, Chief Financial Officer, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, July 24, 2019 at 10:00 a.m. EST. To access the conference call, please dial 855-425-4206 (U.S.) or 484-756-4249 (international). The Company will also host a live audio Webcast of the conference call on the Investor Relations section of the Company's website at http://investor.marketaxess.com. A replay of the call will be made available by dialing 855-859-2056 (U.S.) or 404-537-3406 (international) for one week after the announcement. The passcode for replay callers is 9192897. The Webcast will also be archived on http://investor.marketaxess.com for 90 days following the announcement.

About MarketAxess

MarketAxess operates a leading, institutional electronic trading platform delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income markets.  More than 1,500 firms - comprising the world’s leading asset managers and institutional broker-dealers - traded a record $1.7 trillion of U.S. investment-grade bonds, U.S. high yield bonds, emerging market debt, Eurobonds and other fixed income securities through MarketAxess’ patented trading technology in 2018.   MarketAxess’ award-winning Open Trading™ marketplace is regarded as the preferred all-to-all trading solution in the global credit markets, creating a unique liquidity pool for the broad range of credit market participants.  Drawing on its deep data and analytical resources, MarketAxess enables automated trading solutions and, through its Trax® division, provides a range of pre- and post-trade services and products. 

MarketAxess is headquartered in New York and has offices in London, Amsterdam, Boston, Chicago, Los Angeles, Miami, Salt Lake City, San Francisco, São Paulo, Hong Kong and Singapore. For more information, please visit www.marketaxess.com.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements, including statements about the outlook and prospects for Company and industry growth, as well as statements about the Company’s future financial and operating performance.  These and other statements that relate to future results and events are based on MarketAxess’ current expectations.  The Company’s actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including: global economic, political and market factors; the volatility of financial services markets generally; the level of trading volume transacted on the MarketAxess platform; the absolute level and direction of interest rates and the corresponding volatility in the corporate fixed-income market; the level and intensity of competition in the fixed-income electronic trading industry and the pricing pressures that may result; the variability of our growth rate; the rapidly evolving nature of the electronic financial services industry; our ability to introduce new fee plans and our clients’ response; our exposure to risks resulting from non-performance by counterparties to transactions executed between our clients in which we act as an intermediary in matched principal trades; our dependence on our broker-dealer clients; the loss of any of our significant institutional investor clients; our ability to develop new products and offerings and the market’s acceptance of those products; the effect of rapid market or technological changes on us and the users of our technology; our ability to successfully maintain the integrity of our trading platform and our response to system failures, capacity constraints and business interruptions; our vulnerability to cyber security risks; our ability to protect our intellectual property rights or technology and defend against intellectual property infringement or other claims; our ability to enter into strategic alliances and to acquire other businesses and successfully integrate them with our business; our ability to comply with new and existing laws, rules and regulations both domestically and internationally; our ability to maintain effective compliance and risk management methods; the strain of growth initiatives on management and other resources; our future capital needs and our ability to obtain capital when needed; limitations on our operating flexibility contained in our credit agreement; and other factors.  The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.  More information about these and other factors affecting MarketAxess’ business and prospects is contained in MarketAxess’ periodic filings with the Securities and Exchange Commission and can be accessed at www.marketaxess.com.

Media and Investor Relations Contacts: 
David CresciWilliam McBride
MarketAxess Holdings Inc.RF|Binder
+1-212-813-6027+1-917-239-6726
  
Mary Sedarat 
MarketAxess Holdings Inc. 
+1-212-813-6226 

   

MarketAxess Holdings Inc.
Consolidated Statements of Operations
 
                
      
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
 2019  2018  2019  2018 
 (In thousands, except per share data) 
 (unaudited) 
                
Revenues               
Commissions$114,124  $96,113  $226,884  $198,885 
Information services 7,156   6,930   14,522   13,996 
Post-trade services 3,956   3,620   8,056   8,196 
Other 254   301   519   601 
Total revenues 125,490   106,964   249,981   221,678 
                
Expenses               
Employee compensation and benefits 32,623   26,199   65,281   55,033 
Depreciation and amortization 6,345   5,790   12,427   11,059 
Technology and communications 6,474   5,793   12,256   11,572 
Professional and consulting fees 6,296   5,426   12,127   10,483 
Occupancy 2,798   3,467   5,747   6,804 
Marketing and advertising 3,667   3,535   5,966   5,600 
Clearing costs 2,610   2,012   5,187   3,737 
General and administrative 3,800   2,708   6,924   5,183 
Total expenses 64,613   54,930   125,915   109,471 
Operating income 60,877   52,034   124,066   112,207 
Other income (expense)               
Investment income 2,096   1,383   4,085   2,551 
Other, net (64)  (207)  (22)  (535)
Total other income 2,032   1,176   4,063   2,016 
Income before income taxes 62,909   53,210   128,129   114,223 
Provision for income taxes 14,804   12,723   27,502   25,796 
Net income$48,105  $40,487  $100,627  $88,427 
                
                
Per Share Data:               
Net income per common share               
Basic$1.30  $1.10  $2.72  $2.39 
Diluted$1.27  $1.07  $2.66  $2.33 
                
Cash dividends declared per common share$0.51  $0.42  $1.02  $0.84 
                
Weighted-average common shares:               
Basic 37,049   36,950   37,046   36,952 
Diluted 37,910   37,862   37,871   37,874 

                

MarketAxess Holdings Inc.
Commission Revenue Details
               
               
 Three Months Ended  Six Months Ended
 June 30,  June 30,
 2019  2018  2019  2018
               
 Total Commissions Revenue
 (In thousands)
 (unaudited)
               
Transaction Fees              
U.S. high-grade$42,914  $36,401  $85,415  $75,168
Other credit 1 47,233   34,765   93,267   75,192
Liquid products 2 615   488   1,172   1,071
Total transaction fees 90,762   71,654   179,854   151,431
               
Distribution Fees              
U.S. high-grade 17,483   18,261   35,461   35,488
Other credit1 5,774   6,042   11,332   11,582
Liquid products2 105   156   237   384
Total distribution fees 23,362   24,459   47,030   47,454
Total commissions$114,124  $96,113  $226,884  $198,885
               
               
 Average Variable Transaction Fee Per Million
 (unaudited)
               
U.S. high-grade - fixed-rate$168  $162  $163  $160
U.S. high-grade - floating-rate 65   96   71   95
Total U.S. high-grade 162   158   157   156
Other credit 190   196   193   199
Liquid products 47   39   43   40
Total 172   170   171   171
               
               
1 Other credit includes high-yield, emerging markets, Eurobonds and municipal bonds.
2 Liquid products includes U.S. agencies and European government bonds.
   

 

MarketAxess Holdings Inc.
Consolidated Condensed Balance Sheet Data
 
        
        
 As of 
 June 30, 2019  December 31, 2018 
 (In thousands) 
 (unaudited) 
        
Assets       
Cash and cash equivalents$286,179  $246,322 
Investments, at fair value 231,895   240,105 
Accounts receivable, net 66,332   57,535 
Goodwill and intangible assets, net 62,483   62,675 
Furniture, equipment, leasehold improvements and capitalized
  software, net
 64,206   63,010 
Operating lease right-of-use assets 76,722    
Prepaid expenses and other assets 22,597   22,468 
Deferred tax assets, net 1,595   3,424 
Total assets$812,009  $695,539 
        
Liabilities and stockholders' equity       
Liabilities       
Accrued employee compensation$26,669  $39,053 
Income and other tax liabilities 12,860   16,432 
Deferred revenue 3,810   2,810 
Accounts payable, accrued expenses and other liabilities 17,050   29,366 
Operating lease liabilities 89,712    
Total liabilities 150,101   87,661 
        
Stockholders' equity       
Common stock 122   122 
Additional paid-in capital 341,446   341,860 
Treasury stock (193,632)  (184,962)
Retained earnings 525,430   463,252 
Accumulated other comprehensive loss (11,458)  (12,394)
Total stockholders' equity 661,908   607,878 
Total liabilities and stockholders' equity$812,009  $695,539 
        


MarketAxess Holdings Inc.
Reconciliation of Non-GAAP Financial Measures
 
                
                
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
 2019  2018  2019  2018 
                
 Earnings Before Interest, Taxes, Depreciation and Amortization 
 (In thousands) 
 (unaudited) 
Net income$48,105  $40,487  $100,627  $88,427 
Add back:               
Interest expense           
Provision for income taxes 14,804   12,723   27,502   25,796 
Depreciation and amortization 6,345   5,790   12,427   11,059 
Earnings before interest, taxes, depreciation and
  amortization
$69,254  $59,000  $140,556  $125,282 
                
 Free Cash Flow 
 (In thousands) 
 (unaudited) 
Cash flows from operating activities$69,733  $54,379  $109,102  $85,818 
Exclude: Net change in trading investments (2,839)  6,342   (8,854)  3,288 
Less: Purchases of furniture, equipment and
  leasehold improvements
 (5,465)  (13,757)  (6,114)  (16,035)
Less: Capitalization of software development costs (4,126)  (2,946)  (7,310)  (6,536)
Free cash flow$57,303  $44,018  $86,824  $66,535 

 

MarketAxess Holdings Inc.
Volume Statistics*
               
               
 Three Months Ended June 30,  Six Months Ended June 30,
 2019  2018  2019  2018
               
 Total Trading Volume
 (In millions)
 (unaudited)
               
U.S. high-grade - fixed-rate$249,025  $215,308  $508,858  $451,831
U.S. high-grade - floating-rate 16,335   15,211   33,912   29,673
Total U.S. high-grade 265,360   230,519   542,770   481,504
Other credit 248,503   177,681   482,994   377,624
Liquid products 13,174   12,550   27,450   26,629
Total$527,037  $420,750  $1,053,214  $885,757
               
 Average Daily Volume
 (In millions)
 (unaudited)
U.S. high-grade$4,212  $3,602  $4,377  $3,852
Other credit 3,979   2,796   3,895   3,021
Liquid products 209   197   221   213
Total$8,400  $6,595  $8,493  $7,086
               
Number of U.S. Trading Days 1 63   64   124   125
Number of U.K. Trading Days 2 61   62   124   125
               
               
1 The number of U.S. trading days is based on the SIFMA holiday recommendation calendar.
2 The number of U.K. trading days is based on the U.K. Bank holiday schedule.
               
*Consistent with FINRA TRACE reporting standards, both sides of trades are included in the Company's reported volumes when the Company executes trades on a matched principal basis between two counterparties.