EX-99.1 2 d771467dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

MARKETAXESS REPORTS SECOND QUARTER 2019 RECORD REVENUES

OF $125.5 MILLION, OPERATING INCOME OF $60.9 MILLION AND

DILUTED EPS OF $1.27

Second Quarter Financial Highlights*

 

   

Record revenues of $125.5 million, up 17.3%

 

   

Operating income of $60.9 million, up 17.0%

 

   

Diluted EPS of $1.27, up 18.7% from $1.07

 

   

Record trading volume of $527.0 billion, up 25.3%

 

   

Record trading volume in U.S. high-yield, Eurobonds and emerging market bonds

 

   

Open TradingTM volume of $130.7 billion, up 46.0%

 

* 

All comparisons versus second quarter 2018.

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

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

Second Quarter Results

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

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

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

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

 

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

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

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

Dividend

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

Share Repurchases

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

Balance Sheet Data

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

Non-GAAP Financial Measures and Other Items

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

Webcast and Conference Call Information

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

About MarketAxess

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

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

 

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Cautionary Note Regarding Forward-Looking Statements

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

Media and Investor Relations Contacts:

 

David Cresci    William McBride
MarketAxess Holdings Inc.    RF|Binder
+1-212-813-6027    +1-917-239-6726
Mary Sedarat   
MarketAxess Holdings Inc.   
+1-212-813-6226   

 

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MarketAxess Holdings Inc.

Consolidated Statements of Operations

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019     2018     2019     2018  
     (In thousands, except per share data)  
     (unaudited)  

Revenues

        

Commissions

   $ 114,124     $ 96,113     $ 226,884     $ 198,885  

Information services

     7,156       6,930       14,522       13,996  

Post-trade services

     3,956       3,620       8,056       8,196  

Other

     254       301       519       601  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     125,490       106,964       249,981       221,678  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Employee compensation and benefits

     32,623       26,199       65,281       55,033  

Depreciation and amortization

     6,345       5,790       12,427       11,059  

Technology and communications

     6,474       5,793       12,256       11,572  

Professional and consulting fees

     6,296       5,426       12,127       10,483  

Occupancy

     2,798       3,467       5,747       6,804  

Marketing and advertising

     3,667       3,535       5,966       5,600  

Clearing costs

     2,610       2,012       5,187       3,737  

General and administrative

     3,800       2,708       6,924       5,183  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     64,613       54,930       125,915       109,471  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     60,877       52,034       124,066       112,207  

Other income (expense)

        

Investment income

     2,096       1,383       4,085       2,551  

Other, net

     (64     (207     (22     (535
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

     2,032       1,176       4,063       2,016  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     62,909       53,210       128,129       114,223  

Provision for income taxes

     14,804       12,723       27,502       25,796  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 48,105     $ 40,487     $ 100,627     $ 88,427  
  

 

 

   

 

 

   

 

 

   

 

 

 

Per Share Data:

        

Net income per common share

        

Basic

   $ 1.30     $ 1.10     $ 2.72     $ 2.39  

Diluted

   $ 1.27     $ 1.07     $ 2.66     $ 2.33  

Cash dividends declared per common share

   $ 0.51     $ 0.42     $ 1.02     $ 0.84  

Weighted-average common shares:

        

Basic

     37,049       36,950       37,046       36,952  

Diluted

     37,910       37,862       37,871       37,874  

 

4


MarketAxess Holdings Inc.

Commission Revenue Details

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2019      2018      2019      2018  
     Total Commissions Revenue  
     (In thousands)  
     (unaudited)  

Transaction Fees

           

U.S. high-grade

   $ 42,914      $ 36,401      $ 85,415      $ 75,168  

Other credit 1

     47,233        34,765        93,267        75,192  

Liquid products 2

     615        488        1,172        1,071  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total transaction fees

     90,762        71,654        179,854        151,431  
  

 

 

    

 

 

    

 

 

    

 

 

 

Distribution Fees

           

U.S. high-grade

     17,483        18,261        35,461        35,488  

Other credit1

     5,774        6,042        11,332        11,582  

Liquid products2

     105        156        237        384  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distribution fees

     23,362        24,459        47,030        47,454  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commissions

   $ 114,124      $ 96,113      $ 226,884      $ 198,885  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Average Variable Transaction Fee Per Million  
     (unaudited)  

U.S. high-grade - fixed-rate

   $ 168      $ 162      $ 163      $ 160  

U.S. high-grade - floating-rate

     65        96        71        95  

Total U.S. high-grade

     162        158        157        156  

Other credit

     190        196        193        199  

Liquid products

     47        39        43        40  

Total

     172        170        171        171  

 

1 

Other credit includes high-yield, emerging markets, Eurobonds and municipal bonds.

2 

Liquid products includes U.S. agencies and European government bonds.

 

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MarketAxess Holdings Inc.

Consolidated Condensed Balance Sheet Data

 

     As of  
     June 30, 2019     December 31, 2018  
     (In thousands)  
     (unaudited)  

Assets

    

Cash and cash equivalents

   $ 286,179     $ 246,322  

Investments, at fair value

     231,895       240,105  

Accounts receivable, net

     66,332       57,535  

Goodwill and intangible assets, net

     62,483       62,675  

Furniture, equipment, leasehold improvements and capitalized
software, net

     64,206       63,010  

Operating lease right-of-use assets

     76,722       —    

Prepaid expenses and other assets

     22,597       22,468  

Deferred tax assets, net

     1,595       3,424  
  

 

 

   

 

 

 

Total assets

   $ 812,009     $ 695,539  
  

 

 

   

 

 

 

Liabilities and stockholders’ equity

    

Liabilities

    

Accrued employee compensation

   $ 26,669     $ 39,053  

Income and other tax liabilities

     12,860       16,432  

Deferred revenue

     3,810       2,810  

Accounts payable, accrued expenses and other liabilities

     17,050       29,366  

Operating lease liabilities

     89,712       —    
  

 

 

   

 

 

 

Total liabilities

     150,101       87,661  
  

 

 

   

 

 

 

Stockholders’ equity

    

Common stock

     122       122  

Additional paid-in capital

     341,446       341,860  

Treasury stock

     (193,632     (184,962

Retained earnings

     525,430       463,252  

Accumulated other comprehensive loss

     (11,458     (12,394
  

 

 

   

 

 

 

Total stockholders’ equity

     661,908       607,878  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 812,009     $ 695,539  
  

 

 

   

 

 

 

 

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MarketAxess Holdings Inc.

Reconciliation of Non-GAAP Financial Measures

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019     2018     2019     2018  
     Earnings Before Interest, Taxes, Depreciation and Amortization  
     (In thousands)  
     (unaudited)  

Net income

   $ 48,105     $ 40,487     $ 100,627     $ 88,427  

Add back:

        

Interest expense

     —         —         —         —    

Provision for income taxes

     14,804       12,723       27,502       25,796  

Depreciation and amortization

     6,345       5,790       12,427       11,059  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before interest, taxes, depreciation and amortization

   $ 69,254     $ 59,000     $ 140,556     $ 125,282  
  

 

 

   

 

 

   

 

 

   

 

 

 
     Free Cash Flow  
     (In thousands)  
     (unaudited)  

Cash flows from operating activities

   $ 69,733     $ 54,379     $ 109,102     $ 85,818  

Exclude: Net change in trading investments

     (2,839     6,342       (8,854     3,288  

Less: Purchases of furniture, equipment and leasehold improvements

     (5,465     (13,757     (6,114     (16,035

Less: Capitalization of software development costs

     (4,126     (2,946     (7,310     (6,536
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 57,303     $ 44,018     $ 86,824     $ 66,535  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

7


MarketAxess Holdings Inc.

Volume Statistics*

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2019      2018      2019      2018  
     Total Trading Volume  
     (In millions)  
     (unaudited)  

U.S. high-grade - fixed-rate

   $ 249,025      $ 215,308      $ 508,858      $ 451,831  

U.S. high-grade - floating-rate

     16,335        15,211        33,912        29,673  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. high-grade

     265,360        230,519        542,770        481,504  

Other credit

     248,503        177,681        482,994        377,624  

Liquid products

     13,174        12,550        27,450        26,629  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 527,037      $ 420,750      $ 1,053,214      $ 885,757  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Average Daily Volume  
     (In millions)  
     (unaudited)  

U.S. high-grade

   $ 4,212      $ 3,602      $ 4,377      $ 3,852  

Other credit

     3,979        2,796        3,895        3,021  

Liquid products

     209        197        221        213  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 8,400      $ 6,595      $ 8,493      $ 7,086  
  

 

 

    

 

 

    

 

 

    

 

 

 

Number of U.S. Trading Days 1

     63        64        124        125  

Number of U.K. Trading Days 2

     61        62        124        125  

 

1 

The number of U.S. trading days is based on the SIFMA holiday recommendation calendar.

2 

The number of U.K. trading days is based on the U.K. Bank holiday schedule.

*

Consistent with FINRA TRACE reporting standards, both sides of trades are included in the Company’s reported volumes when the Company executes trades on a matched principal basis between two counterparties.

 

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