MarketAxess Reports Record Quarterly Revenues07.22.2020
Second Quarter Financial Highlights*
- Record revenues of $184.8 million, up 47%
- Record operating income of $104.1 million, up 71%
- Record operating margin of 56.4%, up from 48.5%
- Record diluted EPS of $2.20, up 73% from $1.27
- Record estimated U.S. high-grade and high-yield market share of 21.5% and 14.0%, respectively
- Record credit trading volume of $741.8 billion, up 44%
- Record Open TradingTM volume of $243.8 billion, up 87%
*All comparisons versus second quarter 2019.
MarketAxess Holdings Inc., 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, 2020.
“Record corporate bond new issuance and elevated credit spread volatility led to record corporate bond market volumes in the second quarter,” said Rick McVey, Chairman and CEO of MarketAxess. “Institutional investors and dealers both leaned into our Open Trading marketplace to meet their trading and liquidity needs, driving record estimated market share for both high-grade and high-yield bonds on the system. Estimated transaction cost savings delivered back to our clients reached an all-time high, with client savings exceeding company revenue for the second quarter in a row. We are encouraged by the breadth of volume and market share gains across all credit products and geographic regions, leading to robust revenue and earnings growth. Accelerating market share gains, record active clients, and growing product diversification all position the company well for future growth.”
Second Quarter Results
We reported revenues of $184.8 million, operating income of $104.1 million and diluted EPS of $2.20 for the second quarter of 2020. Join us for our second quarter 2020 earnings call today at 10am EST. https://t.co/fjz9b9FIuM #earnings #fixedincome #electronictrading $MKTX pic.twitter.com/gdK7UgAQMN
— MarketAxess (@MarketAxess) July 22, 2020
Total revenues for the second quarter of 2020 increased 47% to $184.8 million, compared to $125.5 million for the second quarter of 2019. Operating income was $104.1 million, compared to $60.9 million for the second quarter of 2019, an increase of 71%. Operating margin was 56.4%, compared to 48.5% for the second quarter of 2019. Net income totaled $83.9 million, or $2.20 per share on a diluted basis, compared to $48.1 million, or $1.27 per share, for the second quarter of 2019.
Commission revenue for the second quarter of 2020 increased 51% to $172.1 million, compared to $114.1 million for the second quarter of 2019. Variable transaction fees increased 61% to $146.0 million for the second quarter of 2020, compared to variable transaction fees of $90.8 million for the second quarter of 2019. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 21.5% for the second quarter of 2020, compared to an estimated 18.7% for the second quarter of 2019. Variable transaction fees in the second quarter of 2020 includes approximately $3.2 million of U.S. Treasuries trading commissions related to the November 2019 acquisition of LiquidityEdge LLC, now operating as MarketAxess Rates.
All other revenue, which consists of information services, post-trade services and other revenue, increased 12% to $12.7 million, compared to $11.4 million for the second quarter of 2019. The increase in all other revenue was principally due to higher information services revenue of $1.3 million.
Total expenses for the second quarter of 2020 increased 25% to $80.7 million, compared to $64.6 million for the second quarter of 2019. The increase in total expenses was largely due to higher employee compensation and benefit costs, mainly due to an increase in headcount, of $9.0 million, clearing costs, mainly due to record Open Trading activity and U.S. Treasury matched-principal trading, of $3.1 million, technology and communications costs of $2.1 million and depreciation and amortization of $2.0 million. MarketAxess Rates expenses, including amortization of acquired intangibles expense, totaled $3.8 million during the second quarter of 2020.
The effective tax rate for the second quarter of 2020 was 19.7%, compared to 23.5% for the second quarter of 2019. The income tax provision for the second quarter of 2020 and 2019 reflected $5.7 million and $0.4 million, respectively, of excess tax benefits related to share-based compensation awards.
Employee headcount was 561 as of June 30, 2020 compared to 527 as of December 31, 2019 and 480 as of June 30, 2019. The increase in headcount was due to the continued investment in the Company’s growth initiatives, including geographic expansion, trading automation, new trading protocols and the transition to self-clearing.
The Company’s board of directors declared a cash dividend of $0.60 per share of common stock outstanding, to be paid on August 19, 2020 to stockholders of record as of the close of business on August 5, 2020.
A total of 13,064 shares were repurchased in the second quarter of 2020 at a cost of $5.9 million.
Balance Sheet Data
As of June 30, 2020, total assets were $1.0 billion and included $535.5 million in cash, cash equivalents and investments. Total stockholders’ equity as of June 30, 2020 was $853.5 million.
— Kourtney Gibson (@kourtneykgibson) July 21, 2020
The acquisition was announced on 4 May 2022.
Market conditions have been unfavourable for primary issuance.
European trading in fixed income instruments is highly fragmented and non-transparent.
Credit markets are on the cusp of a digital transformation that has come to other asset classes.
LuxSE and UN Women will work to promote sustainable debt advancing gender equality and women’s empowerment.