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MarketAxess Reports Second 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 second quarter ended June 30, 2023.

2Q23 select financial and operational highlights*

  • $179.8 million in total revenues, down 1.3%, reflects impact of low credit spread volatility.
    • 4.0% growth in total revenues year-to-date to $383.0 million compared to the prior year.
  • 6.9% increase in total expenses, driven principally by investments to capture the long-term revenue opportunity in the global fixed-income markets; $75.7 million in operating income.
  • Diluted EPS of $1.59 on net income of $59.9 million. Foreign currency transaction losses and unrealized losses on investments had a $0.04 per diluted share negative impact in the current quarter. The prior year quarter included a net $0.11 per diluted share positive impact from foreign currency transaction gains.
  • Record emerging markets estimated market share1; 10.7% increase in emerging markets local markets trading volume in the quarter driven by a record $31.2 billion in the month of June.
  • Record Eurobonds average daily volume (“ADV”) of $1.9 billion, record estimated market share2 of 18.4% (+330 bps); Municipal bonds estimated market share of 5.8% (+190 bps).
  • Record information services revenue of $11.7 million, up 24.0%, reflecting increasing adoption of Composite+™, our algorithmic pricing engine.
  • Record 2,083 (+7.6%) active client firms, record 1,606 (+11.1%) active U.S. credit client firms; record 1,054 (+7.3%) international active client firms and record 1,127 (+6.7%) active client firms trading three or more products.
  • 39.5% growth in hedge fund client trading volume and 29.0% growth in private bank client trading volume reflecting increasing contribution from new client segments.
  • Record automation trading volume (+26.8%), trade count (+38.1%) and active client firms (+20.7%); record level of algorithmic responses on the platform (+30.7%). Record U.S. high-grade automation trading volume of $41.3 billion in the quarter, up 11.8% versus the prior year.
  • 34% total credit Open Trading® share3 in line with the prior year. Estimated price improvement4 via Open Trading was approximately $157 million and was $409 million year-to-date.

*All comparisons versus second quarter 2022 unless otherwise noted.

Chris Concannon, CEO of MarketAxess, commented:

“In the second quarter we continued to innovate, integrate and execute across our product areas with strong share gains in emerging markets, Eurobonds and municipals, and a significant expansion of our active global client network, especially in U.S. credit. We significantly enhanced our franchise in the quarter despite dramatically lower credit spread volatility which dampened trading activity by ETF market makers, especially in high-yield.

In terms of innovation, we are leveraging our leadership position in the credit markets by delivering new, innovative proprietary data to our clients to help them make better trading decisions. We are integrating the full potential of our data, protocols and liquidity for clients through our new trading platform. And we are expanding our automated solutions with the first client algo, Adaptive Auto-X. We are also continuing to drive growth with the expansion of our international franchise in Eurobonds and emerging markets, as well as domestically in municipal bonds.

In summary, we made significant progress in the second quarter in establishing the next generation of trading tools for clients to engage our integrated markets and drive future growth.

Table 1: 2Q23 select financial results

$ in millions, except per share data

(unaudited)

Revenues

Operating Income

Net Income

Diluted EPS

Net Income

Margin (%)

EBITDA5

EBITDA

Margin (%)5

2Q23

$180

$76

$60

$1.59

33.3%

$91

50.4%

2Q22

$182

$85

$67

$1.78

36.7%

$105

57.6%

% Change

(1%)

(11%)

(10%)

(11%)

(340) bps

(14%)

(720) bps

 

YTD 2023

$383

$171

$133

$3.55

34.9%

$201

52.5%

YTD 2022

$368

$173

$132

$3.49

35.8%

$211

57.2%

% Change

4%

(1%)

1%

2%

(90) bps

(4%)

(470) bps

Table 1A: 2Q23 trading volume (ADV)

CREDIT

RATES

$ in millions

(unaudited)

US/UK Trading

Days6

Total

ADV

Total

Credit

High-Grade

High-Yield

Emerging

Markets

Eurobonds

Municipal

Bonds

Total

Rates

US Govt.

Bonds

Agcy./Other

Govt. Bonds

2Q23

62/60

$27,828

$12,226

$5,697

$1,474

$2,714

$1,942

$389

$15,602

$15,163

$439

2Q22

62/60

$35,389

$12,290

$5,803

$1,771

$2,828

$1,491

$371

$23,099

$22,657

$442

% Change

 

(21%)

(1%)

(2%)

(17%)

(4%)

30%

5%

(32%)

(33%)

(1%)

Table 1B: 2Q23 estimated market share

CREDIT

RATES

(unaudited)

High-Grade

High-Yield

High-Grade/High-

Yield Combined

Eurobonds2

Composite

Corporate Bond7

Municipals

US Govt.

Bonds

2Q23

20.7%

16.5%

19.7%

18.4%

19.7%

5.8%

2.5%

2Q22

22.3%

17.3%

20.9%

15.1%

20.2%

3.9%

3.7%

Bps Change

(160) bps

(80) bps

(120) bps

+330 bps

(50) bps

+190 bps

(120) bps

2Q23 overview of results

Revenues and trading volume

Credit

  • Total credit commission revenue of $154.0 million (including $35.3 million in fixed-distribution fees) decreased $3.4 million, or 2%, compared to $157.4 million (including $31.6 million in fixed-distribution fees) in the prior year. The decrease in total credit commission revenue was driven principally by lower estimated market trading volumes and lower average fee per million (“FPM”), partially offset by a $3.7 million, or 12%, 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 $157.42 from $165.75 in the second quarter of 2022 was mainly due to the lower duration of bonds traded in U.S. high-grade, driven principally by higher bond yields, product mix-shift in other credit products, primarily U.S. high-yield, and client crossing activity in Eurobonds which is executed at a low FPM.
    • U.S. high-grade ADV of $5.7 billion, with estimated market share of 20.7% reflecting the impact of low credit spread volatility.
    • U.S. high-yield ADV of $1.5 billion with estimated market share of 16.5%. Low credit spread volatility has reduced trading activity by ETF market makers, especially in U.S. high-yield, with estimated U.S. high-yield TRACE market ADV down 13.2%.
    • Emerging markets ADV of $2.7 billion decreased from $2.8 billion in the prior year with record estimated market share; decrease of 12.3% in emerging markets estimated market ADV.1 Local markets emerging markets trading volume increased 10.7% to $75.0 billion and represented a record 44.2% of total emerging markets trading volume in the quarter. Local markets trading volume in the quarter benefited from a record $31.2 billion in June, representing a 31.9% increase compared to the prior year.
    • 30.2% increase in Eurobonds ADV to a record $1.9 billion with a record 18.4% (+330 bps) estimated market share, up from 15.1%.2
    • Municipal bond ADV of $389 million, up 4.8%, with estimated market share of 5.8% (+190 bps), up from 3.9%. Municipal bond market ADV decreased 30.1%.
    • 34% Open Trading® share3 of total credit trading volume. Estimated price improvement4 via Open Trading was approximately $157 million in the quarter and is $409 million year-to-date through second quarter 2023.

Rates

  • Total rates commission revenue of $4.6 million decreased 24% compared to the prior year, mainly due to the 32% decrease in rates ADV to $15.6 billion, which was partially offset by a 12% increase in FPM for total rates products to $4.70, compared to $4.21 in the second quarter of 2022.
    • 262 active client firms on the platform, up 64% from 160 in the prior year.

Information services & post-trade services

  • Record information services revenue of $11.7 million increased $2.3 million, or 24%, compared to the prior year. The increase in revenue was principally driven by new Composite+™ data contract revenue.
  • Post-trade services revenue of $9.4 million was up 3%, compared to the prior year.

Expenses

  • Total expenses of $104.1 million increased $6.7 million, or 7%. 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 technology and communication expenses due to higher subscription costs, data center and cloud hosting expense and higher depreciation and amortization expense.

Non-operating

  • Other income (expense): Other income was $3.2 million, down from $4.8 million in the prior year. The current quarter included interest income of $5.3 million, compared to $0.3 million in the prior year, driven by higher interest rates, partially offset by a $1.3 million foreign currency transaction loss and a $0.8 million unrealized loss on U.S. Treasury investments. Foreign currency transaction losses and unrealized losses on investments had a $0.04 per diluted share negative impact in the current quarter. The prior year quarter benefited from a $5.5 million foreign currency transaction gain, which was a net benefit of $0.11 per diluted share.
  • Tax rate: The effective tax rate was 24.2%, compared to 25.3% in the prior year.

Capital

  • The Company had $505.5 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 August 16, 2023 to stockholders of record as of the close of business on August 2, 2023.

Other

  • Employee headcount was 803 as of June 30, 2023, compared to 684 as of June 30, 2022 and 774 as of March 31, 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

  • The Company is reconfirming its previously stated full-year 2023 guidance for operating expenses, effective tax rate and capital expenditures.

1

Emerging markets estimated market share and emerging markets estimated market ADV are derived by combining MarketAxess TraX emerging markets trading volume (currently estimated to represent approximately 55% of the total emerging markets market) and FINRA TRACE-reportable emerging markets trading volume, principally U.S. dollar denominated corporates.

2

Eurobonds estimated market share is derived from MarketAxess TraX data for Eurobonds and covered bonds market trading volume, which is currently estimated to represent approximately 70% of the total European market.

3

Total credit Open Trading share 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.

4

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.

5

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.

6

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.

7

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 currently estimated to represent approximately 70% of the total European market) product areas.

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 cash flow from 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 cash flow from 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 Thursday, July 20, 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

 

 

 

Six Months Ended

 

 

 

 

June 30,

 

 

 

June 30,

 

 

In thousands, except per share data (unaudited)

 

2023

 

 

2022

 

 

%

Change

 

 

 

2023

 

 

2022

 

 

%

Change

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$

158,586

 

 

$

163,463

 

 

 

(3.0

)

%

 

$

340,577

 

 

$

329,576

 

 

 

3.3

 

%

Information services

 

 

11,655

 

 

 

9,396

 

 

 

24.0

 

 

 

 

22,665

 

 

 

19,205

 

 

 

18.0

 

 

Post-trade services

 

 

9,415

 

 

 

9,144

 

 

 

3.0

 

 

 

 

19,395

 

 

 

19,056

 

 

 

1.8

 

 

Other

 

 

190

 

 

 

226

 

 

 

(15.9

)

 

 

 

378

 

 

 

449

 

 

 

(15.8

)

 

Total revenues

 

 

179,846

 

 

 

182,229

 

 

 

(1.3

)

 

 

 

383,015

 

 

 

368,286

 

 

 

4.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

 

48,383

 

 

 

45,435

 

 

 

6.5

 

 

 

 

100,698

 

 

 

93,191

 

 

 

8.1

 

 

Depreciation and amortization

 

 

17,005

 

 

 

15,240

 

 

 

11.6

 

 

 

 

33,466

 

 

 

30,414

 

 

 

10.0

 

 

Technology and communications

 

 

15,235

 

 

 

12,490

 

 

 

22.0

 

 

 

 

30,234

 

 

 

24,682

 

 

 

22.5

 

 

Professional and consulting fees

 

 

8,023

 

 

 

8,920

 

 

 

(10.1

)

 

 

 

15,150

 

 

 

18,541

 

 

 

(18.3

)

 

Occupancy

 

 

3,199

 

 

 

3,700

 

 

 

(13.5

)

 

 

 

6,810

 

 

 

7,087

 

 

 

(3.9

)

 

Marketing and advertising

 

 

3,308

 

 

 

2,949

 

 

 

12.2

 

 

 

 

6,303

 

 

 

4,738

 

 

 

33.0

 

 

Clearing costs

 

 

4,182

 

 

 

4,263

 

 

 

(1.9

)

 

 

 

8,727

 

 

 

8,838

 

 

 

(1.3

)

 

General and administrative

 

 

4,784

 

 

 

4,444

 

 

 

7.7

 

 

 

 

10,544

 

 

 

7,903

 

 

 

33.4

 

 

Total expenses

 

 

104,119

 

 

 

97,441

 

 

 

6.9

 

 

 

 

211,932

 

 

 

195,394

 

 

 

8.5

 

 

Operating income

 

 

75,727

 

 

 

84,788

 

 

 

(10.7

)

 

 

 

171,083

 

 

 

172,892

 

 

 

(1.0

)

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

5,312

 

 

 

254

 

 

NM

 

 

 

 

9,561

 

 

 

313

 

 

NM

 

 

Interest expense

 

 

(53

)

 

 

(337

)

 

 

(84.3

)

 

 

 

(183

)

 

 

(510

)

 

 

(64.1

)

 

Equity in earnings of unconsolidated affiliate

 

 

250

 

 

 

191

 

 

 

30.9

 

 

 

 

454

 

 

 

191

 

 

 

137.7

 

 

Other, net

 

 

(2,286

)

 

 

4,682

 

 

NM

 

 

 

 

(3,770

)

 

 

7,111

 

 

NM

 

 

Total other income (expense)

 

 

3,223

 

 

 

4,790

 

 

 

(32.7

)

 

 

 

6,062

 

 

 

7,105

 

 

 

(14.7

)

 

Income before income taxes

 

 

78,950

 

 

 

89,578

 

 

 

(11.9

)

 

 

 

177,145

 

 

 

179,997

 

 

 

(1.6

)

 

Provision for income taxes

 

 

19,091

 

 

 

22,656

 

 

 

(15.7

)

 

 

 

43,658

 

 

 

48,306

 

 

 

(9.6

)

 

Net income

 

$

59,859

 

 

$

66,922

 

 

 

(10.6

)

 

 

$

133,487

 

 

$

131,691

 

 

 

1.4

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.60

 

 

$

1.78

 

 

 

 

 

 

 

$

3.56

 

 

$

3.52

 

 

 

 

 

 

Diluted

 

$

1.59

 

 

$

1.78

 

 

 

 

 

 

 

$

3.55

 

 

$

3.49

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.72

 

 

$

0.70

 

 

 

 

 

 

 

$

1.44

 

 

$

1.40

 

 

 

 

 

 

Weighted-average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,485

 

 

 

37,529

 

 

 

 

 

 

 

 

37,482

 

 

 

37,456

 

 

 

 

 

 

Diluted

 

 

37,588

 

 

 

37,608

 

 

 

 

 

 

 

 

37,617

 

 

 

37,716

 

 

 

 

 

 

NM - not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
 

Table 3: Commission Revenue Detail

In thousands, except fee per million data

 

 

Three Months Ended June 30,

 

 

 

Six Months Ended June 30,

 

 

(unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

 

2023

 

 

2022

 

 

% Change

 

 

Variable transaction fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

$

118,710

 

 

$

125,802

 

 

 

(5.6

)

%

 

$

259,680

 

 

$

254,484

 

 

 

2.0

 

%

Rates

 

 

 

4,547

 

 

 

6,020

 

 

 

(24.5

)

 

 

 

10,805

 

 

 

12,211

 

 

 

(11.5

)

 

Total variable transaction fees

 

 

 

123,257

 

 

 

131,822

 

 

 

(6.5

)

 

 

 

270,485

 

 

 

266,695

 

 

 

1.4

 

 

Fixed distribution fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

 

35,268

 

 

 

31,592

 

 

 

11.6

 

 

 

 

69,952

 

 

 

62,770

 

 

 

11.4

 

 

Rates

 

 

 

61

 

 

 

49

 

 

 

24.5

 

 

 

 

140

 

 

 

111

 

 

 

26.1

 

 

Total fixed distribution fees

 

 

 

35,329

 

 

 

31,641

 

 

 

11.7

 

 

 

 

70,092

 

 

 

62,881

 

 

 

11.5

 

 

Total commission revenue

 

 

$

158,586

 

 

$

163,463

 

 

 

(3.0

)

 

 

$

340,577

 

 

$

329,576

 

 

 

3.3

 

 

Average variable transaction fee per million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

 

157.42

 

 

 

165.75

 

 

 

(5.0

)

 

 

 

161.43

 

 

 

169.11

 

 

 

(4.5

)

 

Rates

 

 

 

4.70

 

 

 

4.21

 

 

 

11.6

 

 

 

 

4.35

 

 

 

4.05

 

 

 

7.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4: Trading Volume Detail*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

In millions (unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

 

 

 

Volume

 

 

ADV

 

 

Volume

 

 

 

ADV

 

 

Volume

 

 

ADV

 

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High-grade

 

 

$

353,239

 

 

$

5,697

 

 

$

359,785

 

 

 

$

5,803

 

 

 

(1.8

)

%

 

(1.8

)

%

High-yield

 

 

 

91,390

 

 

 

1,474

 

 

 

109,829

 

 

 

 

1,771

 

 

 

(16.8

)

 

 

(16.8

)

 

Emerging markets

 

 

 

168,257

 

 

 

2,714

 

 

 

175,314

 

 

 

 

2,828

 

 

 

(4.0

)

 

 

(4.0

)

 

Eurobonds

 

 

 

116,495

 

 

 

1,942

 

 

 

89,480

 

 

 

 

1,491

 

 

 

30.2

 

 

 

30.2

 

 

Other credit

 

 

 

24,729

 

 

 

399

 

 

 

24,586

 

 

 

 

397

 

 

 

0.6

 

 

 

0.5

 

 

Total credit trading

 

 

 

754,110

 

 

 

12,226

 

 

 

758,994

 

 

 

 

12,290

 

 

 

(0.6

)

 

 

(0.5

)

 

Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government bonds

 

 

 

940,127

 

 

 

15,163

 

 

 

1,404,750

 

 

 

 

22,657

 

 

 

(33.1

)

 

 

(33.1

)

 

Agency and other government bonds

 

 

 

26,721

 

 

 

439

 

 

 

26,845

 

 

 

 

442

 

 

 

(0.5

)

 

 

(0.7

)

 

Total rates trading

 

 

 

966,848

 

 

 

15,602

 

 

 

1,431,595

 

 

 

 

23,099

 

 

 

(32.5

)

 

 

(32.5

)

 

Total trading

 

 

$

1,720,958

 

 

$

27,828

 

 

$

2,190,589

 

 

 

$

35,389

 

 

 

(21.4

)

 

 

(21.4

)

 

Number of U.S. Trading Days1

 

 

 

 

 

 

62

 

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

 

Number of U.K. Trading Days2

 

 

 

 

 

 

60

 

 

 

 

 

 

 

60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

In millions (unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

 

 

 

Volume

 

 

ADV

 

 

Volume

 

 

 

ADV

 

 

Volume

 

 

ADV

 

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High-grade

 

 

$

745,954

 

 

$

6,016

 

 

$

701,878

 

 

 

$

5,660

 

 

 

6.3

 

%

 

6.3

 

%

High-yield

 

 

 

214,263

 

 

 

1,728

 

 

 

210,656

 

 

 

 

1,699

 

 

 

1.7

 

 

 

1.7

 

 

Emerging markets

 

 

 

360,098

 

 

 

2,904

 

 

 

365,054

 

 

 

 

2,944

 

 

 

(1.4

)

 

 

(1.4

)

 

Eurobonds

 

 

 

234,861

 

 

 

1,894

 

 

 

183,556

 

 

 

 

1,492

 

 

 

28.0

 

 

 

26.9

 

 

Other credit

 

 

 

53,412

 

 

 

430

 

 

 

43,661

 

 

 

 

352

 

 

 

22.3

 

 

 

22.2

 

 

Total credit trading

 

 

 

1,608,588

 

 

 

12,972

 

 

 

1,504,805

 

 

 

 

12,147

 

 

 

6.9

 

 

 

6.8

 

 

Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government bonds

 

 

 

2,431,419

 

 

 

19,608

 

 

 

2,959,466

 

 

 

 

23,867

 

 

 

(17.8

)

 

 

(17.8

)

 

Agency and other government bonds

 

 

 

53,782

 

 

 

434

 

 

 

53,363

 

 

 

 

433

 

 

 

0.8

 

 

 

0.2

 

 

Total rates trading

 

 

 

2,485,201

 

 

 

20,042

 

 

 

3,012,829

 

 

 

 

24,300

 

 

 

(17.5

)

 

 

(17.5

)

 

Total trading

 

 

$

4,093,789

 

 

$

33,014

 

 

$

4,517,634

 

 

 

$

36,447

 

 

 

(9.4

)

 

 

(9.4

)

 

Number of U.S. Trading Days1

 

 

 

 

 

 

124

 

 

 

 

 

 

 

124

 

 

 

 

 

 

 

 

 

 

Number of U.K. Trading Days2

 

 

 

 

 

 

124

 

 

 

 

 

 

 

123

 

 

 

 

 

 

 

 

 

 

 

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)

 

June 30, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

396,487

 

 

$

430,746

 

 

Cash segregated under federal regulations

 

 

52,015

 

 

 

50,947

 

 

Investments, at fair value

 

 

109,037

 

 

 

83,792

 

 

Accounts receivable, net

 

 

92,969

 

 

 

78,450

 

 

Receivables from broker-dealers, clearing organizations

and customers

 

 

479,741

 

 

 

476,335

 

 

Goodwill

 

 

154,789

 

 

 

154,789

 

 

Intangible assets, net of accumulated amortization

 

 

89,812

 

 

 

98,065

 

 

Furniture, equipment, leasehold improvements and

capitalized software, net

 

 

99,022

 

 

 

100,256

 

 

Operating lease right-of-use assets

 

 

63,674

 

 

 

66,106

 

 

Prepaid expenses and other assets

 

 

81,645

 

 

 

68,289

 

 

Total assets

 

$

1,619,191

 

 

$

1,607,775

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Accrued employee compensation

 

$

35,877

 

 

$

56,302

 

 

Payables to broker-dealers, clearing organizations

and customers

 

 

287,360

 

 

 

303,993

 

 

Income and other tax liabilities

 

 

18,518

 

 

 

28,448

 

 

Accounts payable, accrued expenses

and other liabilities

 

 

32,422

 

 

 

55,263

 

 

Operating lease liabilities

 

 

79,922

 

 

 

82,676

 

 

Total liabilities

 

 

454,099

 

 

 

526,682

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

Common stock

 

 

123

 

 

 

123

 

 

Additional paid-in capital

 

 

339,867

 

 

 

345,468

 

 

Treasury stock

 

 

(327,815

)

 

 

(328,326

)

 

Retained earnings

 

 

1,180,820

 

 

 

1,101,525

 

 

Accumulated other comprehensive loss

 

 

(27,903

)

 

 

(37,697

)

 

Total stockholders' equity

 

 

1,165,092

 

 

 

1,081,093

 

 

Total liabilities and stockholders' equity

 

$

1,619,191

 

 

$

1,607,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

In thousands (unaudited)

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

59,859

 

 

$

66,922

 

 

 

$

133,487

 

 

$

131,691

 

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(5,312

)

 

 

(254

)

 

 

 

(9,561

)

 

 

(313

)

 

Interest expense

 

 

53

 

 

 

337

 

 

 

 

183

 

 

 

510

 

 

Provision for income taxes

 

 

19,091

 

 

 

22,656

 

 

 

 

43,658

 

 

 

48,306

 

 

Depreciation and amortization

 

 

17,005

 

 

 

15,240

 

 

 

 

33,466

 

 

 

30,414

 

 

EBITDA

 

$

90,696

 

 

$

104,901

 

 

 

$

201,233

 

 

$

210,608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income margin1

 

 

33.3

%

 

 

36.7

%

 

 

 

34.9

%

 

 

35.8

%

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(3.0

)

 

 

(0.1

)

 

 

 

(2.5

)

 

 

(0.1

)

 

Interest expense

 

 

 

 

 

0.2

 

 

 

 

 

 

 

0.1

 

 

Provision for income taxes

 

 

10.6

 

 

 

12.4

 

 

 

 

11.4

 

 

 

13.1

 

 

Depreciation and amortization

 

 

9.5

 

 

 

8.4

 

 

 

 

8.7

 

 

 

8.3

 

 

EBITDA margin2

 

 

50.4

%

 

 

57.6

%

 

 

 

52.5

%

 

 

57.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7: Reconciliation of Cash Flows from Operating Activities to Free Cash Flow

 

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

In thousands (unaudited)

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

$

105,394

 

 

$

93,637

 

 

 

$

112,921

 

 

$

69,907

 

 

Exclude: Net change in trading investments

 

 

(890

)

 

 

 

 

 

 

(471

)

 

 

 

 

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

from broker-dealers, clearing organizations

and customers

 

 

(46,010

)

 

 

(20,376

)

 

 

 

757

 

 

 

48,166

 

 

Less: Purchases of furniture, equipment and

leasehold improvements

 

 

(1,055

)

 

 

(1,285

)

 

 

 

(1,272

)

 

 

(2,681

)

 

Less: Capitalization of software development

costs

 

 

(11,025

)

 

 

(9,136

)

 

 

 

(21,715

)

 

 

(18,561

)

 

Free cash flow

 

$

46,414

 

 

$

62,840

 

 

 

$

90,220

 

 

$

96,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the second quarter we continued to innovate, integrate and execute across our product areas with strong share gains in emerging markets, Eurobonds and municipals, and a significant expansion of our active global client network, especially in U.S. credit

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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