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Share Name | Share Symbol | Market | Type |
---|---|---|---|
MarketAxess Holdings Inc | NASDAQ:MKTX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
2.40 | 1.12% | 216.89 | 216.31 | 220.70 | 217.32 | 213.14 | 214.33 | 215,875 | 01:00:00 |
MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for fixed-income securities, today announced financial results for the fourth quarter and full year ended December 31, 2023.
4Q23 select financial and operational highlights*
*All comparisons versus 4Q22 unless otherwise noted.
Chris Concannon, CEO of MarketAxess, commented:
“In 2023, we made significant strides in enhancing our client franchise, increasing client engagement with MarketAxess X-Pro, our new trading platform, and delivering solid growth in ADV across new product areas and regions.
We have integrated our market leading data, protocols and liquidity pools for clients through X-Pro, designed to make client workflows more efficient. Our innovative proprietary data is powering X-Pro, and we believe, is helping our clients make better trading decisions. We are expanding our automated and algorithmic trading solutions by leveraging our newly acquired quantitative trading expertise to generate new client algorithms. These new algorithms solve for increasing investor demand for efficiency and the need to enhance profitability.
We made significant progress establishing the next generation of trading tools for clients to engage our integrated markets. We are entering 2024 with a more favorable backdrop for fixed-income, and our client franchise has never been stronger. We are focused on realizing the full potential of the investments we have made to drive continued growth in the quarters ahead.”
Table 1: 4Q23 select financial results
$ in millions, except per share data(unaudited) Revenues Operating Income Net Income Diluted EPS Net IncomeMargin (%) EBITDA3 EBITDA Margin(%)34Q23
$197
$77
$70
$1.84
35.3%
$99
50.0%
4Q22
$178
$78
$59
$1.58
33.3%
$92
51.7%
% Change
11%
(1%)
18%
16%
+200 bps
7%
(170) bps
FY 2023
$753
$315
$258
$6.85
34.3%
$383
50.9%
FY 2022
$718
$327
$250
$6.65
34.8%
$395
55.0%
% Change
5%
(4%)
3%
3%
(50) bps
(3%)
(410) bps
Table 1A: 4Q23 trading volume (ADV)
CREDITRATES
$ in millions(unaudited) US/UK TradingDays4 TotalADV TotalCredit High-Grade High-Yield EmergingMarkets Eurobonds MunicipalBonds TotalRates US Govt.Bonds Agcy./OtherGovt. Bonds4Q23
62/63
$29,641
$13,108
$6,215
$1,653
$2,927
$1,767
$539
$16,533
$16,106
$427
4Q22
61/63
$30,424
$12,042
$5,487
$1,805
$2,666
$1,569
$500
$18,382
$18,026
$356
% Change
(3%)
9%
13%
(8%)
10%
13%
8%
(10%)
(11%)
20%
Table 1B: 4Q23 estimated market share
CREDIT RATES (unaudited) High-Grade High-Yield High-Grade/High-Yield Combined Eurobonds5 CompositeCorporate Bond6 Municipals US Govt.Bonds4Q23
20.9%
17.2%
20.0%
15.7%
19.4%
5.8%
2.3%
4Q22
21.1%
20.5%
20.9%
18.2%
20.9%
5.0%
3.1%
Bps Change
(20) bps
(330) bps
(90) bps
(250) bps
(150) bps
+80 bps
(80) bps
4Q23 overview of results
Revenues and trading volume
Credit
Rates
Information services & post-trade services
Technology services
Expenses
Non-operating
Capital
Other
Guidance for full year 2024
For the full year 2024, the Company is providing the following guidance which is based on foreign exchange rates as of December 31, 2023:
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.
2Estimated 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.
3EBITDA 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.
4The 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.
5Eurobonds estimated market ADV and estimated market share is derived from MarketAxess TraX data for Eurobonds and covered bonds market trading volume, which is currently estimated to represent approximately 80% of the total European market.
6Composite 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) product areas.
7Emerging markets estimated market ADV is derived by combining MarketAxess TraX emerging markets trading volume (currently estimated to represent approximately 60% of total emerging markets) 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.
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, and Richard Schiffman, Global Head of Trading Solutions, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, January 31, 2024 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.
General Notes Regarding the Data Presented
Reported MarketAxess volume in all product categories includes only fully electronic trading volume. MarketAxess trading volumes, TRACE reported volumes and MarketAxess Post-Trade processed volumes are available on the Company’s website at investor.marketaxess.com/volume.
For periods beginning with January 2024, the Company will be making changes to the market volume data used to calculate estimated market share for Municipal and U.S. Government Bonds. For Municipal Bonds, the Company previously used estimates, derived from data issued by the Municipal Securities Rule Making Board (“MSRB”), including estimates for new issuance, commercial paper and variable-rate trading activity, and excluded these volumes from the estimated market volume data. While the Company still uses estimates, the new methodology for identifying and excluding these volumes from the market volume data is now based on MSRB “flags” to identify new issuance, commercial paper, and variable-rate volumes. For U.S. Government Bonds, the previous data source for estimated market volumes was the Federal Reserve Bank’s Reported Primary Dealer U.S. Treasury Bond Trading Volumes, which was reported on a one-week lag. The new source for U.S. Government Bond trading volumes is FINRA’s U.S. Treasury TRACE data. The Company believes that the refined methodology used for Municipal Bonds, and the new data source for U.S. Government Bonds, will provide more accurate measures of estimated market volumes and estimated market share. Prior comparable periods will be recast retrospectively for both Municipal and U.S. Government Bonds to conform to the updated presentation of the data. Beginning in January 2024, the new estimated market volume data will also be available on the Company’s website at investor.marketaxess.com/volume.
In addition, beginning with January 2024, the Company will no longer include Eurobonds or Emerging Markets market ADV or estimated market share. The Company is currently reviewing its methodology for calculating such statistics, which historically have been derived from MarketAxess TraX data, to ensure that the statistics presented provide a complete and accurate view of the market.
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.
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 X @MarketAxess.
Table 2: Consolidated Statements of Operations
Three Months Ended
Year Ended
December 31,
December 31,
In thousands, except per share data (unaudited)
2023
2022
% Change
2023
2022
% Change
Revenues
Commissions
$
171,891
$
158,443
8.5
%
$
662,964
$
641,183
3.4
%
Information services
11,917
10,398
14.6
46,383
39,314
18.0
Post-trade services
10,950
8,821
24.1
40,178
36,877
9.0
Technology services
2,490
240
NM
3,022
926
226.3
Total revenues
197,248
177,902
10.9
752,547
718,300
4.8
Expenses
Employee compensation and
benefits
57,356
44,108
30.0
206,926
182,104
13.6
Depreciation and amortization
19,530
15,730
24.2
70,557
61,446
14.8
Technology and communications
17,228
14,113
22.1
62,801
52,964
18.6
Professional and consulting fees
7,604
7,848
(3.1
)
31,935
33,949
(5.9
)
Occupancy
3,903
3,653
6.8
14,216
14,121
0.7
Marketing and advertising
2,646
3,442
(23.1
)
11,049
9,977
10.7
Clearing costs
4,610
4,614
(0.1
)
17,002
17,663
(3.7
)
General and administrative
7,344
6,721
9.3
23,042
19,200
20.0
Total expenses
120,221
100,229
19.9
437,528
391,424
11.8
Operating income
77,027
77,673
(0.8
)
315,019
326,876
(3.6
)
Other income (expense)
Interest income
6,274
3,294
90.5
22,425
5,040
344.9
Interest expense
(1,636
)
(52
)
NM
(1,983
)
(700
)
183.3
Equity in earnings of
unconsolidated affiliate
156
66
136.4
735
1,126
(34.7
)
Other, net
1,991
(1,553
)
NM
(3,496
)
5,946
NM
Total other income (expense)
6,785
1,755
286.6
17,681
11,412
54.9
Income before income taxes
83,812
79,428
5.5
332,700
338,288
(1.7
)
Provision for income taxes
14,185
20,202
(29.8
)
74,645
88,064
(15.2
)
Net income
$
69,627
$
59,226
17.6
$
258,055
$
250,224
3.1
Per Share Data:
Net income per common share
Basic
$
1.85
$
1.58
$
6.87
$
6.68
Diluted
$
1.84
$
1.58
$
6.85
$
6.65
Cash dividends declared per
common share
$
0.72
$
0.70
$
2.88
$
2.80
Weighted-average common shares:
Basic
37,730
37,480
37,546
37,468
Diluted
37,809
37,573
37,654
37,643
NM - not meaningful
Table 3: Commission Revenue Detail
In thousands, except fee per million data
Three Months Ended December 31,
Year Ended December 31,
(unaudited)
2023
2022
% Change
2023
2022
% Change
Variable transaction fees
Credit
$
127,283
$
120,887
5.3
%
$
496,028
$
491,680
0.9
%
Rates
4,735
4,667
1.5
20,749
22,341
(7.1
)
Other
4,979
–
NM
4,979
–
NM
Total variable transaction fees
136,997
125,554
9.1
521,756
514,021
1.5
Fixed distribution fees
Credit
$
34,581
32,817
5.4
140,700
126,915
10.9
Rates
57
72
(20.8
)
252
247
2.0
Other
256
–
NM
256
–
NM
Total fixed distribution fees
34,894
32,889
6.1
141,208
127,162
11.0
Total commission revenue
$
171,891
$
158,443
8.5
$
662,964
$
641,183
3.4
Average variable transaction fee per million
Credit
$
156.28
$
163.87
(4.6
)%
$
158.61
$
166.96
(5.0
)%
Rates
4.62
4.16
11.1
4.46
4.10
8.8
Table 4: Trading Volume Detail*
Three Months Ended December 31,
In millions (unaudited)
2023
2022
% Change
Volume
ADV
Volume
ADV
Volume
ADV
Credit
High-grade
$
385,301
$
6,215
$
334,735
$
5,487
15.1
%
13.3
%
High-yield
102,501
1,653
110,091
1,805
(6.9
)
(8.4
)
Emerging markets
181,445
2,927
162,597
2,666
11.6
9.8
Eurobonds
111,330
1,767
98,853
1,569
12.6
12.6
Other credit
33,854
546
31,404
515
7.8
6.0
Total credit trading
814,431
13,108
737,680
12,042
10.4
8.9
Rates
U.S. government bonds
998,542
16,106
1,099,596
18,026
(9.2
)
(10.7
)
Agency and other government bonds
26,684
427
22,138
356
20.5
19.9
Total rates trading
1,025,226
16,533
1,121,734
18,382
(8.6
)
(10.1
)
Total trading
$
1,839,657
$
29,641
$
1,859,414
$
30,424
(1.1
)
(2.6
)
Number of U.S. Trading Days1
62
61
Number of U.K. Trading Days2
63
63
Year Ended December 31,
In millions (unaudited)
2023
2022
% Change
Volume
ADV
Volume
ADV
Volume
ADV
Credit
High-grade
$
1,457,559
$
5,854
$
1,364,530
$
5,480
6.8
%
6.8
%
High-yield
398,275
1,599
424,812
1,706
(6.2
)
(6.3
)
Emerging markets
717,877
2,883
693,560
2,785
3.5
3.5
Eurobonds
441,171
1,758
362,713
1,451
21.6
21.2
Other credit
112,451
451
99,225
398
13.3
13.3
Total credit trading
3,127,333
12,545
2,944,840
11,820
6.2
6.1
Rates
U.S. government bonds
4,545,850
18,256
5,347,607
21,476
(15.0
)
(15.0
)
Agency and other government bonds
106,933
427
96,782
388
10.5
10.1
Total rates trading
4,652,783
18,683
5,444,389
21,864
(14.5
)
(14.5
)
Total trading
$
7,780,116
$
31,228
$
8,389,229
$
33,684
(7.3
)
(7.3
)
Number of U.S. Trading Days1
249
249
Number of U.K. Trading Days2
251
250
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.
NM - not meaningful
Table 5: Consolidated Condensed Balance Sheet Data
As of
In thousands (unaudited)
December 31, 2023
December 31, 2022
Assets
Cash and cash equivalents
$
451,280
$
430,746
Cash segregated under federal regulations
45,122
50,947
Investments, at fair value
134,861
83,792
Accounts receivable, net
89,839
78,450
Receivables from broker-dealers, clearing organizations
and customers
687,936
476,335
Goodwill
236,706
154,789
Intangible assets, net of accumulated amortization
119,108
98,065
Furniture, equipment, leasehold improvements and
capitalized software, net
102,671
100,256
Operating lease right-of-use assets
63,045
66,106
Prepaid expenses and other assets
84,499
68,289
Total assets
$
2,015,067
$
1,607,775
Liabilities and stockholders' equity
Liabilities
Accrued employee compensation
$
60,124
$
56,302
Payables to broker-dealers, clearing organizations
and customers
537,398
303,993
Income and other tax liabilities
7,892
28,448
Accounts payable, accrued expenses
and other liabilities
37,013
55,263
Operating lease liabilities
79,677
82,676
Total liabilities
722,104
526,682
Stockholders' equity
Common stock
123
123
Additional paid-in capital
333,292
345,468
Treasury stock
(260,298
)
(328,326
)
Retained earnings
1,244,216
1,101,525
Accumulated other comprehensive loss
(24,370
)
(37,697
)
Total stockholders' equity
1,292,963
1,081,093
Total liabilities and stockholders' equity
$
2,015,067
$
1,607,775
Table 6: Reconciliation of Net Income to EBITDA and Net Income Margin to EBITDA Margin
Three Months Ended
December 31,
Year Ended
December 31,
In thousands (unaudited)
2023
2022
2023
2022
Net income
$
69,627
$
59,226
$
258,055
$
250,224
Add back:
Interest income
(6,274
)
(3,294
)
(22,425
)
(5,040
)
Interest expense
1,636
52
1,983
700
Provision for income taxes
14,185
20,202
74,645
88,064
Depreciation and amortization
19,530
15,730
70,557
61,446
EBITDA
$
98,704
$
91,916
$
382,815
$
395,394
Net income margin1
35.3
%
33.3
%
34.3
%
34.8
%
Add back:
Interest income
(3.2
)
(1.8
)
(3.0
)
(0.8
)
Interest expense
0.8
—
0.3
0.1
Provision for income taxes
7.2
11.4
9.9
12.3
Depreciation and amortization
9.9
8.8
9.4
8.6
EBITDA margin2
50.0
%
51.7
%
50.9
%
55.0
%
Table 7: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Three Months Ended
December 31,
Year Ended
December 31,
In thousands (unaudited)
2023
2022
2023
2022
Net cash provided by operating activities
$
141,685
$
134,226
$
333,767
$
289,231
Exclude: Net change in trading investments
948
49,972
25,248
49,527
Exclude: Net change in fail-to-deliver/receive
from broker-dealers, clearing organizations
and customers
(34,354
)
(71,933
)
(46,696
)
(25,994
)
Less: Purchases of furniture, equipment and
leasehold improvements
(2,071
)
(6,500
)
(9,326
)
(13,142
)
Less: Capitalization of software development
costs
(11,320
)
(11,621
)
(43,122
)
(38,730
)
Free cash flow
$
94,888
$
94,144
$
259,871
$
260,892
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240130783344/en/
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
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