MarketAxess Reports Third Quarter 2015 Revenues of $74.2 Million, Pre-Tax Income of $35.4 Million and Diluted EPS of $0.60

Third Quarter Financial Highlights*

  • Total trading volume of $239.7 billion, up 31.6%
  • Revenues of $74.2 million, up 15.5%
  • Pre-tax income of $35.4 million, up 25.1%
  • Diluted EPS of $0.60, up 30.4%

*All comparisons versus third quarter 2014.

NEW YORK, Oct. 21, 2015 (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 September 30, 2015.

“Our third quarter results reflect strong market share gains across all of our core products.  In spite of less favorable credit market conditions during the quarter, we reached record estimated market share levels in both U.S. high-grade and high-yield bonds,” said Richard M. McVey, Chairman and CEO of MarketAxess. “Adoption of our Open Trading solutions is growing and we saw new records during the quarter for Open Trading volume and trade count.  We continue to increase our investment in all-to-all technology solutions to address liquidity challenges in the market.  Our European business shows strong growth and MIFID II is likely to create additional opportunities for e-trading, post-trade regulatory reporting, and data products.”

Third Quarter Results

Total revenues for the third quarter of 2015 increased 15.5% to $74.2 million, compared to $64.2 million for the third quarter of 2014. Pre-tax income was $35.4 million, compared to $28.3 million for the third quarter of 2014, an increase of 25.1%. Pre-tax margin was 47.7%, compared to 44.0% for the third quarter of 2014.  Net income totaled $22.7 million, or $0.60 per share on a diluted basis, compared to $17.5 million, or $0.46 per share, for the third quarter of 2014.

Commission revenue for the third quarter of 2015 increased 19.7% to $65.2 million, compared to $54.5 million for the third quarter of 2014.  Variable transaction fees increased 26.3% to $48.0 million on total trading volume of $239.7 billion for the third quarter of 2015, compared to variable transaction fees of $38.0 million on total trading volume of $182.1 billion for the third quarter of 2014. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 17.3% on an adjusted basis, compared to an estimated 14.6% on an adjusted basis for the third quarter of 2014. For important additional information on FINRA TRACE volumes and U.S. high-grade market share, see Non-GAAP Financial Measures and Other Items below.

All other revenue, which consists of information and post-trade services, technology products and services, investment income and other revenue, decreased to $9.0 million for the third quarter of 2015, compared to $9.8 million for the third quarter of 2014.  Lower technology-related professional consulting services fees and the unfavorable impact of the strengthening U.S. dollar accounted for the decline in all other revenue.

Total expenses for the third quarter of 2015 increased 8.0% to $38.8 million, compared to $36.0 million for the third quarter of 2014. The increase in total expenses was principally due to higher employee compensation and benefits costs of $2.4 million resulting from an increase in incentive and stock-based compensation costs and employee headcount.

The effective tax rate for the third quarter of 2015 was 35.7%, compared to 38.1% for the third quarter of 2014.  The lower effective tax rate was principally due to a shift in income to lower tax jurisdictions and a reduction in statutory foreign and state tax rates.

Dividend

The Company’s board of directors declared a quarterly cash dividend of $0.20 per share of common stock outstanding, to be paid on November 18, 2015 to stockholders of record as of the close of business on November 4, 2015.

Share Repurchase Program

A total of 57,801 shares were repurchased in the third quarter of 2015 at a cost of $5.6 million under the Company’s $100.0 million share repurchase program.  As of September 30, 2015, approximately $42.0 million was available for future repurchases under the program.

Balance Sheet Data

As of September 30, 2015, total assets were $416.3 million and included $255.9 million in cash, cash equivalents and securities available-for-sale.  Total stockholders’ equity as of September 30, 2015 was $373.5 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”).  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.

For purposes of calculating U.S. high-grade estimated market share, FINRA TRACE volumes have been adjusted to eliminate the increased reporting of affiliate back-to-back trade to FINRA beginning in April 2014 and the inclusion of 144A securities beginning in July 2014.  Based on information provided by FINRA, the Company believes that the adjusted FINRA TRACE volumes provide a more accurate comparison to prior period reporting.  The Company has provided a reconciliation of U.S. high-grade TRACE volumes to the adjusted U.S. high-grade TRACE volumes on the “Investor Relations-Volume” section of its website.

Webcast and Conference Call Information

Richard M. McVey, chairman and chief executive officer, and Antonio L. DeLise, chief financial officer, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, October 21, 2015, at 10:00 a.m. Eastern time. 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 Webcast will also be archived on http://investor.marketaxess.com for 90 days following the announcement.

About MarketAxess

MarketAxess operates a leading electronic trading platform that enables fixed-income market participants to efficiently trade corporate bonds and other types of fixed-income instruments using MarketAxess’ patented trading technology.  Over 1,000 institutional investor and broker-dealer firms are active users of the MarketAxess trading platform, accessing global liquidity in U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit default swaps and other fixed-income securities. MarketAxess SEF Corporation has received temporary registration from the U.S. Commodity Futures Trading Commission to operate a swap execution facility.  MarketAxess also offers a number of trading-related products and services, including: market data to assist clients with trading decisions; connectivity solutions that facilitate straight-through processing; technology services to optimize trading environments; and execution services for exchange-traded fund managers and other clients.  Through its Trax® division, MarketAxess also offers a range of pre- and post-trade services, including trade matching, regulatory transaction reporting and market and reference data, across a range of fixed-income products.  Trax is the trading name of Xtrakter Ltd., a MarketAxess group company.

MarketAxess maintains its headquarters in New York and has offices in London, Boston, Chicago, Los Angeles, Salt Lake City, 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: 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 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.

                 
MarketAxess Holdings Inc.  
Consolidated Statements of Operations  
         
  Three Months Ended September 30,    Nine Months Ended September 30,  
    2015       2014       2015       2014    
                                 
  (In thousands, except per share data)  
  (unaudited)  
Revenues                
Commissions $   65,178     $   54,462     $   198,608     $   160,766    
Information and post-trade services     7,671         7,600         22,982         23,641    
Technology products and services     683         1,562         2,865         5,585    
Investment income     248         132         621         416    
Other     412         489         1,378         2,199    
Total revenues     74,192         64,245         226,454         192,607    
                 
Expenses                
Employee compensation and benefits     21,002         18,589         62,769         55,619    
Depreciation and amortization     4,642         4,482         13,857         12,954    
Technology and communications     3,891         4,359         12,196         13,300    
Professional and consulting fees     3,210         3,514         9,503         10,912    
Occupancy     1,246         1,127         3,470         3,318    
Marketing and advertising     1,304         1,331         4,260         4,340    
General and administrative1     3,544         2,575         9,485         7,117    
Total expenses     38,839         35,977         115,540         107,560    
                 
Income before taxes     35,353         28,268         110,914         85,047    
Provision for income taxes     12,638         10,764         39,368         31,877    
Net income $    22,715     $    17,504     $    71,546     $    53,170    
                 
                 
Per Share Data:                
Net income per common share                
Basic $   0.62     $   0.47     $   1.95     $   1.44    
Diluted $   0.60     $   0.46     $   1.90     $   1.40    
                 
Cash dividends declared per common share $   0.20     $   0.16     $   0.60     $   0.48    
                 
Weighted-average common shares:                
Basic     36,681         36,856         36,695         36,997    
Diluted     37,643         37,805         37,636         37,947    
                 
1 Includes clearing costs of $0.8 million and $0.4 million for the three months ended September 30, 2015 and 2014, respectively, and $2.3 million and $0.9 million for the nine months ended September 30, 2015 and 2014, respectively.  
                 

 

                 
MarketAxess Holdings Inc.  
Commission Revenue Details  
                 
  Three Months Ended September 30,   Nine Months Ended September 30,  
    2015       2014       2015       2014    
                 
   Total Commissions Revenues   
  (In millions)  
  (unaudited)  
Transaction Fees                
U.S. High-Grade $   23,337     $   19,412     $   76,662     $   60,065    
Other Credit 1     24,091         17,948         71,321         49,938    
Liquid Products 2     598         658         1,989         2,116    
Total Transaction Fees     48,026         38,018         149,972         112,119    
                 
Distribution Fees                
U.S. High-Grade     15,376         14,475         43,410         42,218    
Other Credit1     1,487         1,735         4,400         5,929    
Liquid Products3     289         234         826         500    
Total Distribution Fees     17,152         16,444         48,636         48,647    
Total Commissions $    65,178     $    54,462     $    198,608     $    160,766    
                 
                 
   Average Variable Transaction Fee Per Million   
  (unaudited)  
U.S. high-grade – fixed-rate $   174     $   184     $   183     $   181    
U.S. high-grade – floating-rate     37         45         44         53    
Total U.S. high-grade      167         177         176         174    
Other credit     286         316         292         309    
Liquid products      39         42         40         44    
Total     200         209         206         202    
                 
                 
1 Other Credit includes high-yield, emerging markets, Eurobonds and structured products bonds.      
2 Liquid Products includes U.S. agencies and European government bonds.          
3 Includes CDS SEF-related revenue.              

 

             
MarketAxess Holdings Inc.   
Consolidated Condensed Balance Sheet Data  
  As of  
      September 30, 2015   December 31, 2014  
                     
      (In thousands)  
      (unaudited)  
Assets        
  Cash and cash equivalents $   160,376     $   168,924    
  Securities available-for-sale     95,516         64,863    
  Accounts receivable, net     49,280         33,836    
  All other assets     111,150         112,261    
    Total assets $   416,322     $   379,884    
             
Liabilities and Stockholders’ Equity         
  Total liabilities     42,851         45,676    
  Total stockholders’ equity     373,471         334,208    
    Total liabilities and stockholders’ equity $   416,322     $   379,884    
             

 

                 
MarketAxess Holdings Inc.  
Reconciliation of Non-GAAP Financial Measures  
Earnings Before Interest, Taxes, Depreciation and Amortization  
                 
  Three Months Ended    Nine Months Ended  
  September 30,   September 30,  
    2015       2014       2015       2014    
                                 
  (In thousands)  
  (unaudited)  
Net income  $   22,715     $   17,504     $   71,546     $   53,170    
Add back:                
Interest expense     –          –          –          –     
Provision for income taxes     12,638         10,764         39,368         31,877    
Depreciation and amortization     4,642         4,482         13,857         12,954    
Earnings before interest, taxes, depreciation and amortization  $    39,995     $    32,750     $    124,771     $    98,001    
                 

 

                 
MarketAxess Holdings Inc.  
Volume Statistics  
             
  Three Months Ended September 30,   Nine Months Ended September 30,  
    2015       2014       2015       2014    
                 
   Total Trading Volume   
  (In millions)  
  (unaudited)  
U.S. high-grade – fixed-rate $   132,625     $   104,143     $   413,071     $   327,242    
U.S. high-grade – floating-rate     7,414         5,569         21,313         17,935    
Total U.S. high-grade      140,039         109,712         434,384         345,177    
Other credit     84,333         56,761         244,256         161,822    
Liquid products      15,353         15,665         49,501         48,594    
Total $    239,725     $    182,138     $    728,141     $    555,593    
                 
   Average Daily Volume   
  (In millions)  
  (unaudited)  
U.S. high-grade $   2,188     $   1,714     $   2,311     $   1,836    
Other credit     1,313         884         1,298         860    
Liquid products      240         245         263         258    
Total $    3,741     $    2,843     $    3,872     $    2,954    
                 
Number of U.S. Trading Days 1     64         64         188         188    
Number of U.K. Trading Days 2     65         65         189         189    
                 
                 
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 riskless principal basis between two counterparties.  
                 

 

CONTACT: Media and Investor Relations Contacts:
Tony DeLise
MarketAxess Holdings Inc
+1-212-813-6017

Florencia Panizza
MarketAxess Holdings Inc.
+1-212-813-6029

William McBride
Bryant Park Financial Communications
+1-917-239-6726