AP NEWS
Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

MarketAxess Reports Third Quarter 2019 Record Revenues of $131.6 Million, Record Operating Income of $66.0 Million and Record Diluted EPS of $1.42

October 23, 2019

Third Quarter Financial Highlights*

-- Record revenues of $131.6 million, up 30% -- Record operating income of $66.0 million, up 42% -- Record diluted EPS of $1.42, up 39% from $1.02 -- Record trading volume of $528.7 billion, up 37% -- Record Open TradingTM volume of $141.7 billion, up 61% -- Record estimated U.S. high-grade market share of 20.2%

*All comparisons versus third quarter 2018.

NEW YORK, Oct. 23, 2019 (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 results for the quarter ended September 30, 2019.

“Broad-based growth in trading volumes across all major products and geographic regions drove record results in the third quarter as dealers and investors continue to embrace new solutions for credit trading automation,” said Rick McVey, Chairman and CEO of MarketAxess. “In addition to the acceleration of growth in current products, we are excited about new growth opportunities in U.S. Treasury trading, portfolio trading and Live Markets. Our investment in new technology solutions and products for our clients continues to grow while at the same time we produced operating margins in excess of 50% during the third quarter.”

Third Quarter Results

Total revenues for the third quarter of 2019 increased 29.7% to $131.6 million, compared to $101.4 million for the third quarter of 2018. Operating income was $66.0 million, compared to $46.4 million for the third quarter of 2018, an increase of 42.1%. Operating margin was 50.1%, compared to 45.8% for the third quarter of 2018. Net income totaled $54.0 million, or $1.42 per share on a diluted basis, compared to $38.6 million, or $1.02 per share, for the third quarter of 2018.

Commission revenue for the third quarter of 2019 increased 32.4% to $119.9 million, compared to $90.5 million for the third quarter of 2018. Variable transaction fees increased 45.5% to $96.0 million on total trading volume of $528.7 billion for the third quarter of 2019, compared to variable transaction fees of $66.0 million on total trading volume of $385.5 billion for the third quarter of 2018. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 20.2% for the third quarter of 2019, compared to an estimated 17.5% for the third quarter of 2018.

All other revenue, which consists of information services, post-trade services and other revenue, increased to $11.7 million, compared to $10.9 million for the third 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 $0.5 million.

Total expenses for the third quarter of 2019 increased 19.3% to $65.6 million, compared to $55.0 million for the third 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, technology and communications expense of $1.5 million, professional and consulting fees of $1.3 million, general and administrative costs of $1.0 million and clearing costs of $1.0 million.

Other income was $1.4 million for each of the third quarters of 2019 and 2018.

The effective tax rate for the third quarter of 2019 was 19.8%, compared to 19.3% for the third quarter of 2018.

Employee headcount was 511 as of September 30, 2019 compared to 444 as of September 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 November 20, 2019 to stockholders of record as of the close of business on November 6, 2019.

Share Repurchases

A total of 7,500 shares were repurchased in the third quarter of 2019 at a cost of $2.8 million.

Balance Sheet Data

As of September 30, 2019, total assets were $855.0 million and included $556.2 million in cash, cash equivalents and investments. Total stockholders’ equity as of September 30, 2019 was $694.6 million.

Guidance for 2019

The Company is reconfirming its full year 2019 expense guidance range of $244.0 million to $256.0 million. The expense guidance range excludes any post-acquisition impact of the LiquidityEdge transaction. The Company is also reconfirming its full year 2019 overall effective tax rate of 20.5% to 22.5%. Finally, the Company is updating its full year 2019 capital expenditure guidance range to $31.0 million to $33.0 million, up from $25.0 million to $30.0 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, October 23, 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 1878106. 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. 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 traded through MarketAxess’ patented trading technology in 2018. The global community of 1,600 firms trading on MarketAxess today include the world’s leading asset managers and institutional broker-dealers. 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 a 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.

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 MarketAxess Holdings Inc. +1-212-813-6027

William McBrideRF|Binder+1-917-239-6726

Mary SedaratMarketAxess Holdings Inc.+1-212-813-6226

MarketAxess Holdings Inc. Consolidated Statements of Operations Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2019 2018 2019 2018 --------- --------- --------- --------- (In thousands, except per share data) (unaudited) Revenues Commissions $ 119,869 $ 90,513 $ 346,753 $ 289,398 Information services 7,693 7,174 22,215 21,170 Post-trade services 3,784 3,475 11,840 11,671 Other 251 281 770 882 - ------- - ------- - ------- - ------- Total revenues 131,597 101,443 381,578 323,121 - ------- - ------- - ------- - ------- Expenses Employee compensation and benefits 32,681 26,282 97,962 81,315 Depreciation and amortization 6,700 6,173 19,127 17,232 Technology and communications 7,381 5,879 19,637 17,451 Professional and consulting fees 7,018 5,685 19,145 16,168 Occupancy 2,802 3,528 8,549 10,332 Marketing and advertising 2,506 2,980 8,472 8,580 Clearing costs 2,782 1,760 7,969 5,497 General and administrative 3,762 2,744 10,686 7,927 - ------- - ------- - ------- - ------- Total expenses 65,632 55,031 191,547 164,502 - ------- - ------- - ------- - ------- Operating income 65,965 46,412 190,031 158,619 Other income (expense) Investment income 2,211 1,635 6,296 4,186 Other, net (838 ) (250 ) (860 ) (785 ) - ------- - ------- - ------- - ------- Total other income 1,373 1,385 5,436 3,401 - ------- - ------- - ------- - ------- Income before income taxes 67,338 47,797 195,467 162,020 Provision for income taxes 13,336 9,203 40,838 34,999 - ------- - ------- - ------- - ------- Net income $ 54,002 $ 38,594 $ 154,629 $ 127,021 - ------- - ------- - ------- - ------- Per Share Data: Net income per common share Basic $ 1.46 $ 1.04 $ 4.17 $ 3.44 Diluted $ 1.42 $ 1.02 $ 4.08 $ 3.36 Cash dividends declared per common share $ 0.51 $ 0.42 $ 1.53 $ 1.26 Weighted-average common shares: Basic 37,066 36,951 37,053 36,952 Diluted 37,995 37,828 37,913 37,859

MarketAxess Holdings Inc. Commission Revenue Details Three Months Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 2019 2018 2019 2018 --------- -------- --------- --------- Total Commissions Revenue -------------------------------------------- (In thousands) (unaudited) Transaction Fees U.S. high-grade $ 45,409 $ 32,385 $ 130,824 $ 107,553 Other credit 1 50,009 33,088 143,276 108,280 Liquid products 2 567 482 1,739 1,553 - ------- - ------ - ------- - ------- Total transaction fees 95,985 65,955 275,839 217,386 - ------- - ------ - ------- - ------- Distribution Fees U.S. high-grade 17,777 18,032 53,238 53,520 Other credit1 5,986 6,385 17,318 17,967 Liquid products2 121 141 358 525 - ------- - ------ - ------- - ------- Total distribution fees 23,884 24,558 70,914 72,012 - ------- - ------ - ------- - ------- Total commissions $ 119,869 $ 90,513 $ 346,753 $ 289,398 - ------- - ------ - ------- - ------- Average Variable Transaction Fee Per Million -------------------------------------------- (unaudited) U.S. high-grade - fixed-rate $ 181 $ 162 $ 169 $ 161 U.S. high-grade - floating-rate 56 91 66 94 Total U.S. high-grade 173 157 163 156 Other credit 196 198 194 199 Liquid products 49 39 44 40 Total 182 171 174 171 1 Other credit includes high-yield, emerging markets, Eurobonds and municipal bonds. 2 Liquid products includes U.S. agencies and European government bonds.

MarketAxess Holdings Inc. Consolidated Condensed Balance Sheet Data As of ------------------------ September30 December31, , 2019 2018 ---------- ---------- (In thousands) (unaudited) Assets Cash and cash equivalents $ 320,527 $ 246,322 Investments, at fair value 235,625 240,105 Accounts receivable, net 72,812 57,535 Goodwill and intangible assets, net 62,387 62,675 Furniture, equipment, leasehold improvements and capitalized 66,531 63,010 software, net Operating lease right-of-use assets 75,390 — Prepaid expenses and other assets 18,591 22,468 Deferred tax assets, net 3,163 3,424 - -------- - -------- Total assets $ 855,026 $ 695,539 - -------- - -------- Liabilities and stockholders’ equity Liabilities Accrued employee compensation $ 35,082 $ 39,053 Income and other tax liabilities 13,274 16,432 Deferred revenue 3,731 2,810 Accounts payable, accrued expenses and other liabilities 16,285 29,366 Operating lease liabilities 92,031 — - -------- - -------- Total liabilities 160,403 87,661 - -------- - -------- Stockholders’ equity Common stock 122 122 Additional paid-in capital 343,543 341,860 Treasury stock (196,402 ) (184,962 ) Retained earnings 560,164 463,252 Accumulated other comprehensive loss (12,804 ) (12,394 ) - -------- - -------- Total stockholders’ equity 694,623 607,878 - -------- - -------- Total liabilities and stockholders’ equity $ 855,026 $ 695,539 - -------- - --------

MarketAxess Holdings Inc. Reconciliation of Non-GAAP Financial Measures Three Months Ended Nine Months Ended September 30, September30, -------------------- ---------------------- 2019 2018 2019 2018 -------- -------- --------- --------- Earnings Before Interest, Taxes, Depreciation and Amortization ---------------------------------------------- (In thousands) (unaudited) Net income $ 54,002 $ 38,594 $ 154,629 $ 127,021 Add back: Interest expense — — — — Provision for income taxes 13,336 9,203 40,838 34,999 Depreciation and amortization 6,700 6,173 19,127 17,232 - ------ - ------ - ------- - ------- Earnings before interest, taxes, depreciation and $ 74,038 $ 53,970 $ 214,594 $ 179,252 amortization - ------ - ------ - ------- - ------- Free Cash Flow ---------------------------------------------- (In thousands) (unaudited) Cash flows from operating activities $ 67,692 $ 67,994 $ 176,794 $ 153,812 Exclude: Net change in trading investments 9,225 (9,959 ) 371 (6,671 ) Less: Purchases of furniture, equipment and (2,569 ) (7,786 ) (8,683 ) (23,821 ) leasehold improvements Less: Capitalization of software development costs (6,553 ) (2,635 ) (13,863 ) (9,171 ) - ------ - ------ - ------- - ------- Free cash flow $ 67,795 $ 47,614 $ 154,619 $ 114,149 - ------ - ------ - ------- - -------

MarketAxess Holdings Inc. Volume Statistics* Three Months Ended Nine Months Ended September 30, September 30, --------------------- ------------------------- 2019 2018 2019 2018 --------- --------- ----------- ----------- Total Trading Volume ------------------------------------------------- (In millions) (unaudited) U.S. high-grade - fixed-rate $ 245,027 $ 191,950 $ 753,885 $ 643,781 U.S. high-grade - floating-rate 16,918 14,066 50,830 43,739 - ------- - ------- - --------- - --------- Total U.S. high-grade 261,945 206,016 804,715 687,520 Other credit 255,097 166,990 738,091 544,614 Liquid products 11,661 12,505 39,111 39,134 - ------- - ------- - --------- - --------- Total $ 528,703 $ 385,511 $ 1,581,917 $ 1,271,268 - ------- - ------- - --------- - --------- Average Daily Volume ------------------------------------------------- (In millions) (unaudited) U.S. high-grade $ 4,093 $ 3,270 $ 4,280 $ 3,657 Other credit 3,972 2,641 3,921 2,893 Liquid products 182 198 208 208 - ------- - ------- - --------- - --------- Total $ 8,247 $ 6,109 $ 8,409 $ 6,758 - ------- - ------- - --------- - --------- Number of U.S. Trading Days1 64 63 188 188 Number of U.K. Trading Days2 65 64 189 189 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.