NEW YORK, July 20, 2022 (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 financial results for the second quarter of 2022.
Rick McVey, Chairman of the Board and CEO of MarketAxess, commented:“Record levels of market share in the quarter reflect the strides that we have made over the past year in executing our growth strategy, expanding our geographic diversification and establishing a broader global foundation for growth.The macro backdrop is now much improved, with credit spreads and credit spread volatility moving back into more historical ranges, driving increased estimated cost savings for clients through Open Trading®, our unique liquidity pool.We believe that our strong growth in trading volume, broad-based market share gains, both year-over-year and sequentially, and increasing momentum in new product areas, including U.S. Treasuries and municipal bonds, are driving our improved performance.” |
2Q22 Financial and operational highlights*
*All comparisons versus second quarter 2021 unless otherwise noted.
Table 1: 2Q22 select financial results | |||||||||||||||||||||||||||||||||
$ in millions, except per share data (unaudited) | Revenues | Operating Income | OperatingMargin (%) | Net Income | Diluted EPS | EBITDA | EBITDAMargin (%) | ||||||||||||||||||||||||||
2Q22 | $182 | $85 | 47% | $67 | $1.78 | $105 | 58% | ||||||||||||||||||||||||||
2Q21 | $176 | $87 | 49% | $67 | $1.77 | $99 | 56% | ||||||||||||||||||||||||||
2Q22 vs. 2Q21% Change | 3% | (3%) | (291) bps | (1%) | 1% | 6% | +138 bps | ||||||||||||||||||||||||||
Table 2: 2Q22 trading volume (ADV) | |||||||||||||||||||||||||||||||||
CREDIT | RATES | ||||||||||||||||||||||||||||||||
$ in millions (unaudited) | Total Volumes | High-Grade | High-Yield | Emerging Markets | Eurobonds | Other Credit Prod. | Total Other Credit | Total Credit | US Govt. Bonds | Agcy./OtherGovt. Bonds | Total Rates | ||||||||||||||||||||||
2Q22 | $35,389 | $5,803 | $1,771 | $2,828 | $1,491 | $397 | $6,487 | $12,290 | $22,657 | $442 | $23,099 | ||||||||||||||||||||||
2Q21 | $24,777 | $5,143 | $1,457 | $2,496 | $1,463 | $105 | $5,521 | $10,664 | $13,850 | $263 | $14,113 | ||||||||||||||||||||||
2Q22 vs. 2Q21% Change | 43% | 13% | 22% | 13% | 2% | 278% | 17% | 15% | 64% | 68% | 64% | ||||||||||||||||||||||
Table 3: 2Q22 Estimated Market Share | |||||||||||||||||||||||||||||||||
CREDIT | RATES | ||||||||||||||||||||||||||||||||
(unaudited) | High-Grade | High-Yield | High-Grade/High-Yield Combined | Eurobonds | CompositeCorporate Bond2 | Municipals | US Govt.Bonds | ||||||||||||||||||||||||||
2Q22 | 22.3% | 17.3% | 20.9% | 15.1% | 20.2% | 3.9% | 3.7% | ||||||||||||||||||||||||||
1Q22 | 20.7% | 15.2% | 19.1% | 12.2% | 18.1% | 4.3% | 3.6% | ||||||||||||||||||||||||||
2Q21 | 21.1% | 14.3% | 19.1% | 11.7% | 17.8% | 2.2% | 2.3% | ||||||||||||||||||||||||||
2Q22 vs. 2Q21BPS Change | +120 bps | +300 bps | +180 bps | +340 bps | +240 bps | +170 bps | +140 bps | ||||||||||||||||||||||||||
2Q22 vs. 1Q22BPS Change | +160 bps | +210 bps | +180 bps | +290 bps | +210 bps | (40) bps | +10 bps |
Overview of results
Revenues
Credit
Rates
Information services & post-trade services
Expenses
Non-operating
Capital
Other
Guidance for 2022
Other highlights
1 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) and Eurobonds (derived from MarketAxess TRAX data which is estimated to represent approximately 75% of the total European market) product areas.
2 Estimated liquidity taker cost savings is defined as the difference between the winning price and the best disclosed dealer cover price. Estimated liquidity provider cost savings is 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.
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. 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 EBITDA margin 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 Christopher Gerosa, Chief Financial Officer, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, July 20, 2022 at 10:00 a.m. EDT. To access the conference call, please dial 866-374-5140 (U.S.) and use the PIN/ID 68886811# or 404-400-0571 (international) and use the PIN/ID 68886811#. 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 1,900 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 the full trading lifecycle, including automated trading solutions, intelligent data 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 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; 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 cyber security risks; 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 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.
Contacts | |
INVESTOR RELATIONS | MEDIA RELATIONS |
Stephen DavidsonMarketAxess Holdings Inc.+1 212 813 6313sdavidson2@marketaxess.com | Marisha MistryMarketAxess Holdings Inc.+1 917 267 1232mmistry@marketaxess.com |
William McBrideRF | Binder+1 917 239 6726 |
Table 4 | |||||||||||||||
MarketAxess Holdings Inc.Consolidated Statements of Operations | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
(unaudited) | |||||||||||||||
Revenues | |||||||||||||||
Commissions | $ | 163,463 | $ | 156,431 | $ | 329,576 | $ | 332,269 | |||||||
Information services | 9,396 | 9,844 | 19,205 | 19,006 | |||||||||||
Post-trade services | 9,144 | 9,848 | 19,056 | 20,109 | |||||||||||
Other | 226 | 211 | 449 | 414 | |||||||||||
Total revenues | 182,229 | 176,334 | 368,286 | 371,798 | |||||||||||
Expenses | |||||||||||||||
Employee compensation and benefits | 45,435 | 40,732 | 93,191 | 88,820 | |||||||||||
Depreciation and amortization | 15,240 | 13,097 | 30,414 | 24,876 | |||||||||||
Technology and communications | 12,490 | 10,544 | 24,682 | 20,580 | |||||||||||
Professional and consulting fees | 8,920 | 10,704 | 18,541 | 20,344 | |||||||||||
Occupancy | 3,700 | 3,300 | 7,087 | 6,617 | |||||||||||
Marketing and advertising | 2,949 | 3,128 | 4,738 | 4,332 | |||||||||||
Clearing costs | 4,263 | 4,372 | 8,838 | 9,066 | |||||||||||
General and administrative | 4,444 | 3,280 | 7,903 | 6,512 | |||||||||||
Total expenses | 97,441 | 89,157 | 195,394 | 181,147 | |||||||||||
Operating income | 84,788 | 87,177 | 172,892 | 190,651 | |||||||||||
Other income (expense) | |||||||||||||||
Investment income | 254 | 107 | 313 | 214 | |||||||||||
Interest expense | (337 | ) | (171 | ) | (510 | ) | (362 | ) | |||||||
Equity in earnings of unconsolidated affiliate | 191 | — | 191 | — | |||||||||||
Other, net | 4,682 | (1,060 | ) | 7,111 | (2,649 | ) | |||||||||
Total other income (expense) | 4,790 | (1,124 | ) | 7,105 | (2,797 | ) | |||||||||
Income before income taxes | 89,578 | 86,053 | 179,997 | 187,854 | |||||||||||
Provision for income taxes | 22,656 | 18,765 | 48,306 | 40,109 | |||||||||||
Net income | $ | 66,922 | $ | 67,288 | $ | 131,691 | $ | 147,745 | |||||||
Per Share Data: | |||||||||||||||
Net income per common share | |||||||||||||||
Basic | $ | 1.78 | $ | 1.79 | $ | 3.52 | $ | 3.94 | |||||||
Diluted | $ | 1.78 | $ | 1.77 | $ | 3.49 | $ | 3.87 | |||||||
Cash dividends declared per common share | $ | 0.70 | $ | 0.66 | $ | 1.40 | $ | 1.32 | |||||||
Weighted-average common shares: | |||||||||||||||
Basic | 37,529 | 37,508 | 37,456 | 37,489 | |||||||||||
Diluted | 37,608 | 38,104 | 37,716 | 38,129 |
Table 5 | |||||||||||||||
MarketAxess Holdings Inc.Commission Revenue Details | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Total Commissions Revenue | |||||||||||||||
(In thousands) | |||||||||||||||
(unaudited) | |||||||||||||||
Transaction Fees | |||||||||||||||
U.S. high-grade | $ | 51,576 | $ | 56,413 | $ | 104,454 | $ | 121,769 | |||||||
Other credit 1 | 74,226 | 67,074 | 150,030 | 145,973 | |||||||||||
Total credit | 125,802 | 123,487 | 254,484 | 267,742 | |||||||||||
Rates 2 | 6,020 | 3,612 | 12,211 | 7,755 | |||||||||||
Total transaction fees | 131,822 | 127,099 | 266,695 | 275,497 | |||||||||||
Distribution Fees | |||||||||||||||
U.S. high-grade | 23,496 | 21,373 | 46,522 | 42,343 | |||||||||||
Other credit1 | 8,096 | 7,895 | 16,248 | 14,299 | |||||||||||
Total credit | 31,592 | 29,268 | 62,770 | 56,642 | |||||||||||
Rates2 | 49 | 64 | 111 | 130 | |||||||||||
Total distribution fees | 31,641 | 29,332 | 62,881 | 56,772 | |||||||||||
Total commissions | $ | 163,463 | $ | 156,431 | $ | 329,576 | $ | 332,269 | |||||||
Average Variable Transaction Fee Per Million | |||||||||||||||
(unaudited) | |||||||||||||||
U.S. high-grade - fixed-rate | $ | 145.93 | $ | 179.02 | $ | 151.87 | $ | 182.21 | |||||||
U.S. high-grade - floating-rate | 48.15 | 36.40 | 50.12 | 41.19 | |||||||||||
Total U.S. high-grade | 143.35 | 174.11 | 148.82 | 177.13 | |||||||||||
Other credit 1 | 185.93 | 194.49 | 186.85 | 198.36 | |||||||||||
Total credit | 165.75 | 184.62 | 169.11 | 188.11 | |||||||||||
Rates2 | 4.21 | 4.07 | 4.05 | 3.86 | |||||||||||
1 Other credit includes high-yield, emerging markets, Eurobonds and municipal bonds. | |||||||||||||||
2 Rates includes U.S. Government bonds, agencies and other government bonds. | |||||||||||||||
Table 6 | |||||||
MarketAxess Holdings Inc.Consolidated Condensed Balance Sheet Data | |||||||
As of | |||||||
June 30, 2022 | December 31, 2021 | ||||||
(In thousands) | |||||||
(unaudited) | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 290,544 | $ | 506,735 | |||
Cash segregated under federal regulations | 50,276 | 50,159 | |||||
Investments, at fair value | 34,297 | 36,078 | |||||
Accounts receivable, net | 87,475 | 63,881 | |||||
Receivables from broker-dealers, clearing organizations and customers | 617,817 | 408,346 | |||||
Goodwill | 154,789 | 154,789 | |||||
Intangible assets, net of accumulated amortization | 105,607 | 116,377 | |||||
Furniture, equipment, leasehold improvements and capitalized software, net | 93,255 | 96,061 | |||||
Operating lease right-of-use assets | 68,602 | 70,960 | |||||
Prepaid expenses and other assets | 65,048 | 27,066 | |||||
Total assets | $ | 1,567,710 | $ | 1,530,452 | |||
Liabilities and stockholders' equity | |||||||
Liabilities | |||||||
Accrued employee compensation | $ | 35,685 | $ | 59,719 | |||
Payables to broker-dealers, clearing organizations and customers | 375,211 | 229,325 | |||||
Income and other tax liabilities | 27,660 | 40,456 | |||||
Accounts payable, accrued expenses and other liabilities | 42,797 | 71,218 | |||||
Operating lease liabilities | 85,555 | 88,425 | |||||
Total liabilities | 566,908 | 489,143 | |||||
Stockholders' equity | |||||||
Common stock | 123 | 123 | |||||
Additional paid-in capital | 325,047 | 330,262 | |||||
Treasury stock | (320,252 | ) | (232,712 | ) | |||
Retained earnings | 1,035,723 | 956,966 | |||||
Accumulated other comprehensive loss | (39,839 | ) | (13,330 | ) | |||
Total stockholders' equity | 1,000,802 | 1,041,309 | |||||
Total liabilities and stockholders' equity | $ | 1,567,710 | $ | 1,530,452 | |||
Table 7 | ||||||||||||||||||
MarketAxess Holdings Inc.Reconciliation of Non-GAAP Financial Measures | ||||||||||||||||||
Three Months Ended June 30, | Six Months EndedJune 30, | |||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||
Earnings Before Interest, Taxes, Depreciation and Amortization | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Net income | $ | 66,922 | $ | 67,288 | $ | 131,691 | $ | 147,745 | ||||||||||
Add back: | ||||||||||||||||||
Interest expense | 337 | 171 | 510 | 362 | ||||||||||||||
Provision for income taxes | 22,656 | 18,765 | 48,306 | 40,109 | ||||||||||||||
Depreciation and amortization | 15,240 | 13,097 | 30,414 | 24,876 | ||||||||||||||
Earnings before interest, taxes, depreciation and Amortization (“EBITDA”) | $ | 105,155 | $ | 99,321 | $ | 210,921 | $ | 213,092 | ||||||||||
EBITDA margin1 | 57.7 | % | 56.3 | % | 57.3 | % | 57.3 | % | ||||||||||
Free Cash Flow | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
Cash flows from operating activities | $ | 93,637 | $ | 96,726 | $ | 69,907 | $ | 73,567 | ||||||||||
Exclude: Net change in trading investments | — | 11,064 | — | 5,569 | ||||||||||||||
Exclude: Net change in fail-to-deliver/receive from broker-dealers, clearing organizations and customers | (20,376 | ) | (26,596 | ) | 48,166 | 66,774 | ||||||||||||
Less: Purchases of furniture, equipment and leasehold improvements | (1,285 | ) | (5,552 | ) | (2,681 | ) | (9,809 | ) | ||||||||||
Less: Capitalization of software development costs | (9,136 | ) | (8,384 | ) | (18,561 | ) | (16,459 | ) | ||||||||||
Free cash flow | $ | 62,840 | $ | 67,258 | $ | 96,831 | $ | 119,642 | ||||||||||
1 EBITDA margin is derived by dividing EBITDA by revenue for the applicable period. |
Table 8 | |||||||||||||||
MarketAxess Holdings Inc.Volume Statistics* | |||||||||||||||
Three Months EndedJune 30, | Six Months EndedJune 30, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Total Trading Volume | |||||||||||||||
(In millions) | |||||||||||||||
(unaudited) | |||||||||||||||
U.S. high-grade - fixed-rate | $ | 350,296 | $ | 312,858 | $ | 680,854 | $ | 662,673 | |||||||
U.S. high-grade - floating-rate | 9,489 | 11,153 | 21,024 | 24,779 | |||||||||||
Total U.S. high-grade | 359,785 | 324,011 | 701,878 | 687,452 | |||||||||||
Other credit | 399,209 | 344,865 | 802,927 | 735,885 | |||||||||||
Total credit | 758,994 | 668,876 | 1,504,805 | 1,423,337 | |||||||||||
Rates | 1,431,595 | 888,267 | 3,012,829 | 2,009,135 | |||||||||||
Average Daily Volume | |||||||||||||||
(In millions) | |||||||||||||||
(unaudited) | |||||||||||||||
U.S. high-grade | $ | 5,803 | $ | 5,143 | $ | 5,660 | $ | 5,544 | |||||||
Other credit | 6,487 | 5,521 | 6,487 | 5,935 | |||||||||||
Total credit | 12,290 | 10,664 | 12,147 | 11,479 | |||||||||||
Rates | 23,099 | 14,113 | 24,297 | 16,203 | |||||||||||
Number of U.S. Trading Days 1 | 62 | 63 | 124 | 124 | |||||||||||
Number of U.K. Trading Days 2 | 60 | 61 | 123 | 124 | |||||||||||
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. | |||||||||||||||