MarketAxess Revenues Fall in Second Quarter
- Revenues ofÂ $176.3 million, down 5%
- Operating income ofÂ $87.2 million, down 16%
- Operating margin of 49.4%
- Diluted EPS ofÂ $1.77, down 20% fromÂ $2.20
- 2-year compound annual growth rates of 19% for revenue and 20% for operating income compared to second quarter of 2019
- EstimatedÂ U.S.Â high-grade market share of 21.1%
- Record municipal bond trading volume; closed MuniBrokers transaction inÂ April 2021
- Emerging market trading volume up 11%; estimated market volumes down 17%
- Record active total client firms of 1,842 and international client firms of 930
*All comparisons versus second quarter 2020 unless otherwise stated.
MarketAxess Holdings, 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, announced results for the quarter ended June 30, 2021.
We reported revenues of $176.3 million, operating income of $87.2 million and diluted EPS of $1.77 for the second quarter of 2021. Join us for our second quarter earnings call today at 10am ET. https://t.co/beYrk0axB0 #earnings #fixedincome #electronictrading $MKTX pic.twitter.com/8b36iFlly7
— MarketAxess (@MarketAxess) July 21, 2021
â€śSecond quarter results were heavily impacted by low levels of credit market volatility in a very tough year over year comparison for MarketAxess,â€ť said Chairman and CEOÂ Rick McVey. â€śWe are proud of the Companyâ€™s record results achieved last Spring during elevated credit spread volatility and high market volume caused by the Pandemic and, though we were not able to duplicate those results, we believe the Companyâ€™s long-term revenue and earnings growth rates remain on track. In addition to consistent long-term growth in our core business, we are excited about the progress we are making in our international business, emerging markets, municipal bonds, and new trading protocols. We believe our investments are creating a much broader foundation for future growth that will be evident when more normal levels of volatility return to fixed income markets.â€ť
Second Quarter Results
Total revenues for the second quarter of 2021 decreased 4.6% toÂ $176.3 million, compared toÂ $184.8 millionÂ for the second quarter of 2020. Operating income wasÂ $87.2 million, compared toÂ $104.1 millionÂ for the second quarter of 2020, a decrease of 16.3%. Operating margin was 49.4%, compared to 56.4% for the second quarter of 2020. Net income totaledÂ $67.3 million, orÂ $1.77Â per share on a diluted basis, compared toÂ $83.9 million, orÂ $2.20Â per share, for the second quarter of 2020.
Commission revenue for the second quarter of 2021 decreased 9.1% toÂ $156.4 million, compared toÂ $172.1 millionÂ for the second quarter of 2020. Variable transaction fees decreased 13.0% toÂ $127.1 millionÂ for the second quarter of 2021, compared to variable transaction fees ofÂ $146.0 millionÂ for the second quarter of 2020. Commission revenue includesÂ $1.1 millionÂ generated by MuniBrokers, which was acquired inÂ April 2021.Â U.S.Â high-grade trading volume as a percentage of FINRAâ€™s high-grade TRACE trading volume was an estimated 21.1% for the second quarter of 2021, compared to an estimated 21.5% for the second quarter of 2020. EstimatedÂ U.S.Â credit TRACE trading volume decreased by 18.7% year-over-year.
All other revenue, which consists of information services, post-trade services and other revenue, increased toÂ $19.9 million, compared toÂ $12.7 millionÂ for the second quarter of 2020. The increase in all other revenue was principally due toÂ $3.8 millionÂ of regulatory trade reporting revenue generated by Regulatory Reporting Hub, which was acquired from Deutsche BĂ¶rse Group inÂ November 2020, andÂ $1.3 millionÂ of revenue due to the weakerÂ U.S.Â dollar toÂ U.K.Â pound sterling exchange rate.
Total expenses for the second quarter of 2021 increased 10.5% toÂ $89.2 million, compared toÂ $80.7 millionÂ for the second quarter of 2020. The increase in total expenses was largely due to higher depreciation and amortization ofÂ $4.8 million, which includesÂ $2.8 millionÂ of acquired intangibles expense; higher professional and consulting fees ofÂ $2.6 million, mainly attributable to non-recurring integration costs associated with the Regulatory Reporting Hub transaction ofÂ $1.3 millionÂ and self-clearing consulting fees ofÂ $0.7 million; and higher technology and communication costs ofÂ $2.0 millionÂ which was partially offset by a decrease in clearing costs ofÂ $1.3 million. Expenses in the second quarter of 2021 reflect operating expenses and costs associated with the MuniBrokers and Regulatory Reporting Hub businessess totalingÂ $5.1 million. Excluding the MuniBrokers and Regulatory Reporting Hub expenses, total expenses for the quarter were up 4.2%.
The effective tax rate for the second quarter of 2021 was 21.8%, compared to 19.7% for the second quarter of 2020. The income tax provision for the second quarter of 2021 and 2020 reflectedÂ $5.6 millionÂ andÂ $5.7 million, respectively, of excess tax benefits related to share-based compensation awards.
Employee headcount was 637 as ofÂ June 30, 2021Â compared to 561 as ofÂ June 30, 2020. The increase in headcount was due to the continued investment in the Companyâ€™s growth initiatives, including geographic expansion, trading automation, new trading protocols and the transition to self-clearing.
MarketAxess Q2 earnings are out:
Revenue -5% YoY
Op Income -16%
When your business is 90% transaction fees you live by macro swings and you die by macro swings. Ugliest quarter for MKTX in quite a while… pic.twitter.com/iZj2leHT8r
— Hide Not Slide (@HideNotSlide) July 21, 2021
The Companyâ€™s board of directors declared a quarterly cash dividend toÂ $0.66Â per share of common stock outstanding, to be paid onÂ August 18, 2021Â to stockholders of record as of the close of business onÂ August 4, 2021.
A total of 28,701 shares were repurchased in the second quarter of 2021 at a cost ofÂ $13.4 million.
Balance Sheet Data
As ofÂ June 30, 2021, total assets wereÂ $1.5 billionÂ and includedÂ $449.5 millionÂ in cash, cash equivalents and investments. Total stockholdersâ€™ equity as ofÂ June 30, 2021Â wasÂ $1.0 billion.
FIA PTG said a viable agency clearing model can increase market resiliency, liquidity and transparency.
This provides straight-through access to ICE Bondsâ€™ all-to-all municipal bond market.
The scheme has become the main channel for international investors to access Chinaâ€™s Interbank Bond Market.
The Singapore-based bank has deployed the first digital bond end-to-end workflow.
Portfolio trading accounts for a small but growing portion of the U.S. credit market.