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MarketAxess Reports Third Quarter 2023 Results

MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for fixed-income securities, today announced financial results for the third quarter ended September 30, 2023.

3Q23 select financial and operational highlights*

  • $172.3 million in total revenues, in line with the prior year, reflecting the impact of low credit spread volatility in the period.
  • 10.0% increase in total expenses, driven principally by investments to capture the long-term revenue opportunity in the global fixed-income markets; $66.9 million in operating income.
  • Diluted EPS of $1.46 on net income of $54.9 million.
  • Record information services revenue of $11.8 million, up 21.5%, reflecting increasing adoption of Composite+™.
  • Strong geographic and product diversification with 11.3% increase in average daily volume (“ADV”) from international products (emerging markets and Eurobonds); 7.4% growth in municipal bonds ADV with estimated market share of 5.8% (+90 bps).
  • Record automated trading volume (+45.7%), trade count (+54.5%) and active client firms (+24.6%); record level of algorithmic responses (+40.7%). Total automated trade volume and trade count surpassed full-year 2022 levels as of October 4, 2023.
  • Record 2,093 (+6.1%) active client firms, record 1,625 (+8.2%) active U.S. credit client firms; record 1,056 (+6.3%) international active client firms and record 1,151 (+6.7%) active client firms trading three or more products.
  • 33% total credit Open Trading® share1 down from 37% in the prior year on lower credit spread volatility. The Company delivered estimated price improvement2 via Open Trading of approximately $120 million in the third quarter of 2023 and $529 million year-to-date.

*All comparisons versus 3Q22 unless otherwise noted.

Table 1: 3Q23 select financial results

$ in millions, except per share data

(unaudited)
Revenues Operating Income Net Income Diluted EPS Net Income

Margin (%)
EBITDA3 EBITDA Margin

(%)3

3Q23

$172

$67

$55

$1.46

31.9%

$83

48.1%

3Q22

$172

$76

$59

$1.58

34.5%

$93

54.0%

% Change

-

(12%)

(7%)

(8%)

(260) bps

(11%)

(590) bps

YTD 2023

$555

$238

$188

$5.01

33.9%

$284

51.2%

YTD 2022

$540

$249

$191

$5.07

35.3%

$303

56.2%

% Change

3%

(4%)

(2%)

(1%)

(140) bps

(6%)

(500) bps

Table 1A: 3Q23 trading volume (ADV)

CREDIT

RATES

$ in millions

(unaudited)
US/UK Trading

Days4
Total

ADV
Total

Credit
High-Grade High-Yield Emerging

Markets
Eurobonds Municipal

Bonds
Total

Rates
US Govt.

Bonds
Agcy./Other

Govt. Bonds

3Q23

63/64

$29,285

$11,156

$5,179

$1,294

$2,799

$1,484

$388

$18,129

$17,713

$416

3Q22

64/64

$31,440

$10,974

$5,124

$1,626

$2,592

$1,255

$361

$20,466

$20,133

$333

% Change

 

(7%)

2%

1%

(20%)

8%

18%

7%

(11%)

(12%)

25%

Table 1B: 3Q23 estimated market share

CREDIT RATES


(unaudited)
High-Grade High-Yield High-Grade/High-

Yield Combined
Eurobonds5 Composite

Corporate Bond6
Municipals US Govt.

Bonds

3Q23

20.0%

16.1%

19.1%

15.8%

18.8%

5.8%

2.9%

3Q22

21.1%

19.3%

20.6%

17.6%

20.6%

4.9%

3.6%

Bps Change

(110) bps

(320) bps

(150) bps

(180) bps

(180) bps

+90 bps

(70) bps

3Q23 overview of results

Revenues and trading volume

Credit

  • Total credit commission revenue of $145.2 million (including $36.2 million in fixed-distribution fees) decreased $2.4 million, or 2%, compared to $147.6 million (including $31.3 million in fixed-distribution fees) in the prior year. The decrease in total credit commission revenue was driven principally by lower estimated market share and lower average fee per million (“FPM”), partially offset by a $4.8 million, or 15%, increase in total credit fixed-distribution fees. The increase in total credit fixed-distribution fees was driven principally by new dealers on fixed fee plans and upgrades of dealers on existing fixed fee plans. The decline in FPM for total credit to $154.85 from $165.60 in the third quarter of 2022 was mainly due to product mix-shift in other credit products, primarily lower U.S. high-yield activity and the lower duration of bonds traded in U.S. high-grade.

    The last week of September 2023 was the second highest week of credit trading volume ever for the Company, as volatility increased at the end of the month.

    — U.S. high-grade ADV of $5.2 billion, up 1.1% with estimated market share of 20.0%. U.S. high-grade estimated market ADV increased 6.4%.

    — U.S. high-yield ADV of $1.3 billion, down 20.4% with estimated market share of 16.1%. U.S. high-yield estimated market ADV decreased 4.5%. The decrease in U.S. high-yield estimated market share was driven principally by low levels of credit spread volatility, resulting in a decrease in ETF market maker activity on the platform. The VIX index, an indicator of volatility, was an average 15.1 in 3Q23, down 39.1% from 24.7 in 3Q22.

    8.0% increase in emerging markets ADV to $2.8 billion, driven by a 26.9% increase in local markets trading volume, partially offset by a 4.2% decline in hard currency trading volume; 4.3% decrease in emerging markets estimated market ADV.7

    18.2% increase in Eurobonds ADV to $1.5 billion. Eurobonds estimated market ADV increased 31.6%.5

    — Municipal bond ADV of $388 million, up 7.4% with estimated market share of 5.8%. Municipal bond estimated market ADV decreased 10.1%.

    $27.5 billion in total portfolio trading volume, up 11.1% from $24.7 billion in 3Q22.

    33% Open Trading® share1 of total credit trading volume, down from 37% in the prior year on lower credit spread volatility. Estimated price improvement2 delivered via Open Trading in the quarter was approximately $120 million and is $529 million year-to-date through September 2023.

Rates

  • Total rates commission revenue of $5.2 million decreased 5% compared to the prior year, mainly due to the 11% decrease in rates ADV to $18.1 billion, which was partially offset by a 9% increase in FPM for total rates products to $4.56, compared to $4.17 in the third quarter of 2022.

    289 active client firms on the platform, up 40% from 206 in the prior year.

Information services & post-trade services

  • Record information services revenue of $11.8 million increased $2.1 million, or 22%, compared to the prior year. The increase in revenue was principally driven by new Composite+ data contract revenue and the impact of foreign currency fluctuations. Excluding the impact of foreign currency fluctuations, information services revenue would have increased approximately 17%.
  • Post-trade services revenue of $9.8 million was up 9% compared to the prior year mainly due to the impact of foreign currency fluctuations. Excluding the impact of foreign currency fluctuations, post-trade services revenue would have increased approximately 2%.

Expenses

  • Total expenses of $105.4 million increased $9.5 million, or 10%. The increase in expenses was driven principally by higher employee compensation and benefits as a result of a 17% increase in headcount, mainly in technology and customer-facing roles, higher depreciation and amortization expense and increased professional and consulting fees. Excluding the impact of foreign currency fluctuations, total expenses would have increased approximately 8%.

Non-operating

  • Other income (expense): Other income was $4.8 million, up from $2.6 million in the prior year. The current quarter included interest income of $6.6 million, compared to $1.4 million in the prior year, driven by higher interest rates.
  • Tax rate: The effective tax rate was 23.4%, compared to 24.8% in the prior year.

Capital

  • The Company had $553.3 million in cash, cash equivalents and investments; there were no outstanding borrowings under the Company’s credit facility.
  • The Board declared a quarterly cash dividend of $0.72 per share, payable on November 22, 2023 to stockholders of record as of the close of business on November 8, 2023.

Other

  • Employee headcount was 853 as of September 30, 2023, compared to 732 as of September 30, 2022 and 803 as of June 30, 2023. The increase in headcount compared to the prior year was principally due to the continued investment in the Company’s growth initiatives, including geographic expansion, trading automation and new trading protocols.

Guidance

  • Based on the progression of operating expenses and the acquisition of Pragma, which closed on October 2, 2023, the Company is refining its previously stated full-year 2023 expense guidance range of $418.0 million to $446.0 million, to a new range of $432.0 million to $438.0 million. The new range includes an estimated $12.5 million of M&A related expenses, including $8.5 million of direct operating expenses related to Pragma and $4.0 million of non-recurring M&A expenses.
  • The Company is reconfirming its full-year 2023 capital expenditures guidance range of $52.0 million to $58.0 million.
  • The Company now expects the full-year 2023 effective tax rate to be approximately 23.5%, below the previously stated range of 25.0% to 26.0%. The lower effective tax rate for the year is mainly driven by favorable apportionment in connection with state tax filings and other federal tax filing positions.

1

Open Trading share of total credit trading volume is derived by taking total Open Trading volume across all credit products where Open Trading is offered and dividing by total credit trading volume across all credit products where Open Trading is offered.

 

2

Estimated price improvement consists of estimated liquidity taker price improvement (defined as the difference between the winning price and the best disclosed dealer cover price) and estimated liquidity provider price improvement (defined as the difference between the winning price and then current Composite+ bid or offer level, offer if the provider is buying, bid if provider is selling) at the time of the inquiry.

 

3

EBITDA and EBITDA margin are non-GAAP financial measures. Refer to “Non-GAAP financial measures and other items” for a discussion of changes made to the calculation of EBITDA beginning in the first quarter of 2023.

 

4

The number of U.S. trading days is based on the SIFMA holiday recommendation calendar and the number of U.K. trading days is based primarily on the U.K. bank holiday schedule.

 

5

Eurobonds estimated market ADV is derived from MarketAxess TraX data for Eurobonds and covered bonds market trading volume, which is now estimated to represent approximately 80% of the total European market beginning in September 2023, up from the previous estimate of 70%.

 

6

Composite corporate bond estimated market share is defined as combined estimated market share across U.S. high-grade (derived from FINRA TRACE reported data), U.S. high-yield (derived from FINRA TRACE reported data), emerging markets (derived from FINRA TRACE-reportable emerging markets volume, principally U.S. dollar denominated corporates) and Eurobonds (derived from MarketAxess TraX data, which is now estimated to represent approximately 80% of the total European market, up from the previous estimate of 70%) product areas.

 

7

Emerging markets estimated market ADV is derived by combining MarketAxess TraX emerging markets trading volume (estimated to represent approximately 60% of the total emerging markets market beginning in September 2023, up from the previous estimate of 55%) and FINRA TRACE-reportable emerging markets trading volume, principally U.S. dollar denominated corporates.

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”), EBITDA margin and free cash flow. Starting with the first quarter of 2023, our calculation of EBITDA has been revised to adjust for interest income in addition to interest expense. In prior periods, we only adjusted for interest expense because interest income amounts were insignificant. Prior comparable periods have now been recast to conform to the current presentation. Likewise, starting with the first quarter of 2023, EBITDA margin is calculated by adjusting for interest income in addition to interest expense and prior comparable periods have been recast to conform to the current presentation. We define EBITDA margin as EBITDA divided by revenues. We define free cash flow as net cash provided by/(used in) operating activities excluding the net change in trading investments and net change in securities failed-to-deliver and securities failed-to-receive from broker-dealers, clearing organizations and customers, less expenditures for furniture, equipment and leasehold improvements and capitalized software development costs. The Company believes that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, provide additional information regarding the Company’s operating results because they assist both investors and management in analyzing and evaluating the performance of our business. See the attached schedule for a reconciliation of GAAP net income to EBITDA, GAAP net income margin to EBITDA margin and GAAP net cash provided by/(used in) operating activities to free cash flow.

The Company also presents revenue and expense growth rates excluding the impact of foreign currency fluctuations. The Company believes that it is useful to provide investors with this framework that is also used by management to assess how our business performed excluding the effect of foreign currency fluctuations. To present this information, current and comparative prior period results for product areas reporting in currencies other than U.S. dollars are converted into U.S. dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the current period.

Please refer to Tables 6 and 7 for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.

Webcast and conference call information

Chris Concannon, Chief Executive Officer, Richard Schiffman, Global Head of Trading Solutions and Christopher Gerosa, Chief Financial Officer, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, October 25, 2023 at 10:00 a.m. ET. To access the conference call, please dial 888-660-6576 (U.S.) and use the ID 3629577 or 929-203-1995 (international) and use the ID 3629577. 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. The Webcast will be archived on http://investor.marketaxess.com for 90 days following the announcement.

About MarketAxess

MarketAxess (Nasdaq: MKTX) operates a leading electronic trading platform that delivers greater trading efficiency, a diversified pool of liquidity and significant cost savings to institutional investors and broker-dealers across the global fixed-income markets. Over 2,000 firms leverage MarketAxess’ patented technology to efficiently trade fixed-income securities. MarketAxess’ award-winning Open Trading® marketplace is widely regarded as the preferred all-to-all trading solution in the global credit markets. Founded in 2000, MarketAxess connects a robust network of market participants through an advanced full trading lifecycle solution that includes automated trading solutions, intelligent data and index products and a range of post-trade services. Learn more at www.marketaxess.com and on Twitter @MarketAxess.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements, including statements about the outlook and prospects for Company, market conditions 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; risks relating to the COVID-19 pandemic, including the possible effects of the economic conditions worldwide resulting from the COVID-19 pandemic; adverse effects as a result of climate change or other ESG risks that could affect our reputation; the level of trading volume transacted on the MarketAxess platform; the rapidly evolving nature of the electronic financial services industry; the level and intensity of competition in the fixed-income electronic trading industry and the pricing pressures that may result; reputational or credibility risks related to our data products and index business; the variability of our growth rate; our ability to introduce new fee plans and our clients’ response; our ability to attract clients or adapt our technology and marketing strategy to new markets; risks related to our growing international operations; our dependence on our broker-dealer clients; the loss of any of our significant institutional investor clients; 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; risks related to self-clearing; risks related to sanctions levied against states or individuals that could expose us to operational or regulatory risks; the effect of rapid market or technological changes on us and the users of our technology; our dependence on third-party suppliers for key products and services; our ability to successfully maintain the integrity of our trading platform and our response to system failures, capacity constraints and business interruptions; the occurrence of design defects, errors, failures or delays with our platforms; our vulnerability to malicious cyber-attacks and attempted data security breaches; our actual or perceived failure to comply with privacy and data protection laws; 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 dependence on our management team and our ability to attract and retain talent; limitations on our flexibility because we operate in a highly regulated industry; the increasing government regulation of us and our clients; risks related to the divergence of U.K. and European Union legal and regulatory requirements following the U.K.’s exit from the European Union; our exposure to costs and penalties related to our extensive regulation; our risks of litigation and securities laws liability; 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.

Table 2: Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

In thousands, except per share data (unaudited)

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

 

% Change

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$

150,496

 

 

$

153,164

 

 

 

(1.7

)%

 

$

491,073

 

 

$

482,740

 

 

 

1.7

%

Information services

 

 

11,801

 

 

 

9,711

 

 

 

21.5

 

 

 

34,466

 

 

 

28,916

 

 

 

19.2

 

Post-trade services

 

 

9,833

 

 

 

9,000

 

 

 

9.3

 

 

 

29,228

 

 

 

28,056

 

 

 

4.2

 

Other

 

 

154

 

 

 

237

 

 

 

(35.0

)

 

 

532

 

 

 

686

 

 

 

(22.4

)

Total revenues

 

 

172,284

 

 

 

172,112

 

 

 

0.1

 

 

 

555,299

 

 

 

540,398

 

 

 

2.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

48,872

 

 

 

44,805

 

 

 

9.1

 

 

 

149,570

 

 

 

137,996

 

 

 

8.4

 

Depreciation and amortization

 

 

17,561

 

 

 

15,302

 

 

 

14.8

 

 

 

51,027

 

 

 

45,716

 

 

 

11.6

 

Technology and communications

 

 

15,339

 

 

 

14,169

 

 

 

8.3

 

 

 

45,573

 

 

 

38,851

 

 

 

17.3

 

Professional and consulting fees

 

 

9,181

 

 

 

7,560

 

 

 

21.4

 

 

 

24,331

 

 

 

26,101

 

 

 

(6.8

)

Occupancy

 

 

3,503

 

 

 

3,381

 

 

 

3.6

 

 

 

10,313

 

 

 

10,468

 

 

 

(1.5

)

Marketing and advertising

 

 

2,100

 

 

 

1,797

 

 

 

16.9

 

 

 

8,403

 

 

 

6,535

 

 

 

28.6

 

Clearing costs

 

 

3,665

 

 

 

4,211

 

 

 

(13.0

)

 

 

12,392

 

 

 

13,049

 

 

 

(5.0

)

General and administrative

 

 

5,154

 

 

 

4,576

 

 

 

12.6

 

 

 

15,698

 

 

 

12,479

 

 

 

25.8

 

Total expenses

 

 

105,375

 

 

 

95,801

 

 

 

10.0

 

 

 

317,307

 

 

 

291,195

 

 

 

9.0

 

Operating income

 

 

66,909

 

 

 

76,311

 

 

 

(12.3

)

 

 

237,992

 

 

 

249,203

 

 

 

(4.5

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

6,590

 

 

 

1,433

 

 

NM

 

 

 

16,151

 

 

 

1,746

 

 

NM

 

Interest expense

 

 

(164

)

 

 

(138

)

 

 

18.8

 

 

 

(347

)

 

 

(648

)

 

 

(46.5

)

Equity in earnings of

unconsolidated affiliate

 

 

125

 

 

 

869

 

 

 

(85.6

)

 

 

579

 

 

 

1,060

 

 

 

(45.4

)

Other, net

 

 

(1,717

)

 

 

388

 

 

NM

 

 

 

(5,487

)

 

 

7,499

 

 

NM

 

Total other income (expense)

 

 

4,834

 

 

 

2,552

 

 

 

89.4

 

 

 

10,896

 

 

 

9,657

 

 

 

12.8

 

Income before income taxes

 

 

71,743

 

 

 

78,863

 

 

 

(9.0

)

 

 

248,888

 

 

 

258,860

 

 

 

(3.9

)

Provision for income taxes

 

 

16,802

 

 

 

19,556

 

 

 

(14.1

)

 

 

60,460

 

 

 

67,862

 

 

 

(10.9

)

Net income

 

$

54,941

 

 

$

59,307

 

 

 

(7.4

)

 

$

188,428

 

 

$

190,998

 

 

 

(1.3

)

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.47

 

 

$

1.58

 

 

 

 

 

 

$

5.03

 

 

$

5.10

 

 

 

 

 

Diluted

 

$

1.46

 

 

$

1.58

 

 

 

 

 

 

$

5.01

 

 

$

5.07

 

 

 

 

 

Cash dividends declared per

common share

 

$

0.72

 

 

$

0.70

 

 

 

 

 

 

$

2.16

 

 

$

2.10

 

 

 

 

 

Weighted-average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,491

 

 

 

37,479

 

 

 

 

 

 

 

37,485

 

 

 

37,464

 

 

 

 

 

Diluted

 

 

37,574

 

 

 

37,567

 

 

 

 

 

 

 

37,603

 

 

 

37,666

 

 

 

 

 

NM - not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3: Commission Revenue Detail

In thousands, except fee per million data

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

% Change

 

Variable transaction fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

$

109,065

 

 

$

116,309

 

 

 

(6.2

)%

 

$

368,745

 

 

$

370,793

 

 

(0.6

)%

Rates

 

 

 

5,209

 

 

 

5,463

 

 

 

(4.6

)

 

 

16,014

 

 

 

17,674

 

 

(9.4

)

Total variable transaction fees

 

 

 

114,274

 

 

 

121,772

 

 

 

(6.2

)

 

 

384,759

 

 

 

388,467

 

 

(1.0

)

Fixed distribution fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

 

36,167

 

 

 

31,328

 

 

 

15.4

 

 

 

106,119

 

 

 

94,098

 

 

12.8

 

Rates

 

 

 

55

 

 

 

64

 

 

 

(14.1

)

 

 

195

 

 

 

175

 

 

11.4

 

Total fixed distribution fees

 

 

 

36,222

 

 

 

31,392

 

 

 

15.4

 

 

 

106,314

 

 

 

94,273

 

 

12.8

 

Total commission revenue

 

 

$

150,496

 

 

$

153,164

 

 

 

(1.7

)

 

$

491,073

 

 

$

482,740

 

 

1.7

 

Average variable transaction fee per million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

$

154.85

 

 

$

165.60

 

 

 

(6.5

)%

 

$

159.43

 

 

$

168.00

 

 

(5.1

)%

Rates

 

 

 

4.56

 

 

 

4.17

 

 

 

9.4

 

 

 

4.41

 

 

 

4.09

 

 

7.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4: Trading Volume Detail*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

In millions (unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

 

 

Volume

 

 

ADV

 

 

Volume

 

 

ADV

 

 

Volume

 

ADV

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High-grade

 

 

$

326,304

 

 

$

5,179

 

 

$

327,916

 

 

$

5,124

 

 

 

(0.5

)%

 

1.1

%

High-yield

 

 

 

81,511

 

 

 

1,294

 

 

 

104,066

 

 

 

1,626

 

 

 

(21.7

)

 

(20.4

)

Emerging markets

 

 

 

176,334

 

 

 

2,799

 

 

 

165,910

 

 

 

2,592

 

 

 

6.3

 

 

8.0

 

Eurobonds

 

 

 

94,980

 

 

 

1,484

 

 

 

80,305

 

 

 

1,255

 

 

 

18.3

 

 

18.2

 

Other credit

 

 

 

25,185

 

 

 

400

 

 

 

24,159

 

 

 

377

 

 

 

4.2

 

 

6.1

 

Total credit trading

 

 

 

704,314

 

 

 

11,156

 

 

 

702,356

 

 

 

10,974

 

 

 

0.3

 

 

1.7

 

Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government bonds

 

 

 

1,115,889

 

 

 

17,713

 

 

 

1,288,543

 

 

 

20,133

 

 

 

(13.4

)

 

(12.0

)

Agency and other government bonds

 

 

 

26,467

 

 

 

416

 

 

 

21,281

 

 

 

333

 

 

 

24.4

 

 

24.9

 

Total rates trading

 

 

 

1,142,356

 

 

 

18,129

 

 

 

1,309,824

 

 

 

20,466

 

 

 

(12.8

)

 

(11.4

)

Total trading

 

 

$

1,846,670

 

 

$

29,285

 

 

$

2,012,180

 

 

$

31,440

 

 

 

(8.2

)

 

(6.9

)

Number of U.S. Trading Days1

 

 

 

 

 

 

63

 

 

 

 

 

 

64

 

 

 

 

 

 

 

 

Number of U.K. Trading Days2

 

 

 

 

 

 

64

 

 

 

 

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

In millions (unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

 

 

Volume

 

 

ADV

 

 

Volume

 

 

ADV

 

 

Volume

 

ADV

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High-grade

 

 

$

1,072,258

 

 

$

5,734

 

 

$

1,029,794

 

 

$

5,478

 

 

 

4.1

%

 

4.7

%

High-yield

 

 

 

295,774

 

 

 

1,582

 

 

 

314,721

 

 

 

1,674

 

 

 

(6.0

)

 

(5.5

)

Emerging markets

 

 

 

536,432

 

 

 

2,869

 

 

 

530,964

 

 

 

2,824

 

 

 

1.0

 

 

1.6

 

Eurobonds

 

 

 

329,841

 

 

 

1,754

 

 

 

263,862

 

 

 

1,411

 

 

 

25.0

 

 

24.3

 

Other credit

 

 

 

78,597

 

 

 

420

 

 

 

67,820

 

 

 

361

 

 

 

15.9

 

 

16.3

 

Total credit trading

 

 

 

2,312,902

 

 

 

12,359

 

 

 

2,207,161

 

 

 

11,748

 

 

 

4.8

 

 

5.2

 

Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government bonds

 

 

 

3,547,308

 

 

 

18,970

 

 

 

4,248,009

 

 

 

22,596

 

 

 

(16.5

)

 

(16.0

)

Agency and other government bonds

 

 

 

80,249

 

 

 

428

 

 

 

74,644

 

 

 

397

 

 

 

7.5

 

 

7.8

 

Total rates trading

 

 

 

3,627,557

 

 

 

19,398

 

 

 

4,322,653

 

 

 

22,993

 

 

 

(16.1

)

 

(15.6

)

Total trading

 

 

$

5,940,459

 

 

$

31,757

 

 

$

6,529,814

 

 

$

34,741

 

 

 

(9.0

)

 

(8.6

)

Number of U.S. Trading Days1

 

 

 

 

 

 

187

 

 

 

 

 

 

188

 

 

 

 

 

 

 

 

Number of U.K. Trading Days2

 

 

 

 

 

 

188

 

 

 

 

 

 

187

 

 

 

 

 

 

 

 

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. Consistent with industry standards, U.S. government bond trades are single-counted.

Table 5: Consolidated Condensed Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

In thousands (unaudited)

 

September 30, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

420,497

 

 

$

430,746

 

 

Cash segregated under federal regulations

 

 

52,601

 

 

 

50,947

 

 

Investments, at fair value

 

 

132,844

 

 

 

83,792

 

 

Accounts receivable, net

 

 

90,548

 

 

 

78,450

 

 

Receivables from broker-dealers, clearing organizations

and customers

 

 

548,081

 

 

 

476,335

 

 

Goodwill

 

 

154,789

 

 

 

154,789

 

 

Intangible assets, net of accumulated amortization

 

 

84,687

 

 

 

98,065

 

 

Furniture, equipment, leasehold improvements and

capitalized software, net

 

 

101,654

 

 

 

100,256

 

 

Operating lease right-of-use assets

 

 

63,101

 

 

 

66,106

 

 

Prepaid expenses and other assets

 

 

88,710

 

 

 

68,289

 

 

Total assets

 

$

1,737,512

 

 

$

1,607,775

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Accrued employee compensation

 

$

43,881

 

 

$

56,302

 

 

Payables to broker-dealers, clearing organizations

and customers

 

 

364,086

 

 

 

303,993

 

 

Income and other tax liabilities

 

 

19,379

 

 

 

28,448

 

 

Accounts payable, accrued expenses

and other liabilities

 

 

40,019

 

 

 

55,263

 

 

Operating lease liabilities

 

 

79,169

 

 

 

82,676

 

 

Total liabilities

 

 

546,534

 

 

 

526,682

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

Common stock

 

 

123

 

 

 

123

 

 

Additional paid-in capital

 

 

346,947

 

 

 

345,468

 

 

Treasury stock

 

 

(327,091

)

 

 

(328,326

)

 

Retained earnings

 

 

1,208,607

 

 

 

1,101,525

 

 

Accumulated other comprehensive loss

 

 

(37,608

)

 

 

(37,697

)

 

Total stockholders' equity

 

 

1,190,978

 

 

 

1,081,093

 

 

Total liabilities and stockholders' equity

 

$

1,737,512

 

 

$

1,607,775

 

 

 

 

 

 

 

Table 6: Reconciliation of Net Income to EBITDA and Net Income Margin to EBITDA Margin

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

In thousands (unaudited)

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

54,941

 

 

$

59,307

 

 

 

$

188,428

 

 

$

190,998

 

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(6,590

)

 

 

(1,433

)

 

 

 

(16,151

)

 

 

(1,746

)

 

Interest expense

 

 

164

 

 

 

138

 

 

 

 

347

 

 

 

648

 

 

Provision for income taxes

 

 

16,802

 

 

 

19,556

 

 

 

 

60,460

 

 

 

67,862

 

 

Depreciation and amortization

 

 

17,561

 

 

 

15,302

 

 

 

 

51,027

 

 

 

45,716

 

 

EBITDA

 

$

82,878

 

 

$

92,870

 

 

 

$

284,111

 

 

$

303,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income margin1

 

 

31.9

%

 

 

34.5

%

 

 

 

33.9

%

 

 

35.3

%

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(3.8

)

 

 

(0.8

)

 

 

 

(2.9

)

 

 

(0.3

)

 

Interest expense

 

 

0.1

 

 

 

0.1

 

 

 

 

0.1

 

 

 

0.1

 

 

Provision for income taxes

 

 

9.7

 

 

 

11.3

 

 

 

 

10.9

 

 

 

12.6

 

 

Depreciation and amortization

 

 

10.2

 

 

 

8.9

 

 

 

 

9.2

 

 

 

8.5

 

 

EBITDA margin2

 

 

48.1

%

 

 

54.0

%

 

 

 

51.2

%

 

 

56.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

In thousands (unaudited)

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

79,161

 

 

$

85,098

 

 

 

$

192,082

 

 

$

155,005

 

 

Exclude: Net change in trading investments

 

 

24,771

 

 

 

(445

)

 

 

 

24,300

 

 

 

(445

)

 

Exclude: Net change in fail-to-deliver/receive

from broker-dealers, clearing organizations

and customers

 

 

(13,099

)

 

 

(2,227

)

 

 

 

(12,342

)

 

 

45,939

 

 

Less: Purchases of furniture, equipment and

leasehold improvements

 

 

(5,983

)

 

 

(3,961

)

 

 

 

(7,255

)

 

 

(6,642

)

 

Less: Capitalization of software development

costs

 

 

(10,087

)

 

 

(8,548

)

 

 

 

(31,802

)

 

 

(27,109

)

 

Free cash flow

 

$

74,763

 

 

$

69,917

 

 

 

$

164,983

 

 

$

166,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Net income margin is derived by dividing net income by total revenues for the applicable period.

 

 

2 EBITDA margin is derived by dividing EBITDA by total revenues for the applicable period.

 

 

 

Contacts

INVESTOR RELATIONS

Stephen Davidson

MarketAxess Holdings Inc.

+1 212 813 6313

sdavidson2@marketaxess.com

MEDIA RELATIONS

Marisha Mistry

MarketAxess Holdings Inc.

+1 917 267 1232

mmistry@marketaxess.com

William McBride

RF | Binder

+1 917 239 6726

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