MarketAxess Holdings, Inc.
Feb 1, 2012
PDF
Add to Briefcase

MarketAxess Reports Fourth Quarter 2011 Revenues of $45.1 Million, Pre-Tax Income of $18.9 Million and Diluted EPS of $0.29

Company Announces Increase of Regular Quarterly Dividend to $0.11 per Share, up from $0.09

Fourth Quarter Financial Highlights*

*All comparisons versus fourth quarter 2010.

Full Year 2011 Financial Highlights**

**All comparisons versus full year 2010.

NEW YORK--(BUSINESS WIRE)--Feb. 1, 2012-- MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for U.S. and European high-grade corporate bonds, emerging markets bonds and other types of fixed-income securities, today announced results for the fourth quarter and full year ended December 31, 2011.

“We closed the year on a strong note and are pleased to report record revenues, pre-tax income and pre-tax margins for the full year of 2011,” said Richard M. McVey, chairman and chief executive officer of MarketAxess. “Our estimated U.S. high grade market share continued to progress higher throughout 2011, culminating in a record 12.2% in the fourth quarter. We believe that the ongoing changes to global market structure, driven in part by regulatory reform, will continue to favor e-trading in the cash and derivative credit markets.”

Fourth Quarter Results

Total revenues for the fourth quarter of 2011 increased 16.9% to $45.1 million, compared to $38.6 million for the fourth quarter of 2010. Pre-tax income was $18.9 million, compared to $14.4 million for the fourth quarter of 2010, an increase of 30.6%. Pre-tax margin was 41.8%, compared to 37.4% for the fourth quarter of 2010. Net income totaled $11.5 million, or $0.29 per share on a diluted basis, compared to $8.9 million, or $0.23 per share on a diluted basis, for the fourth quarter of 2010.

Commission revenue for the fourth quarter of 2011 totaled $38.8 million on total trading volume of $125.2 billion, compared to $32.3 million in commission revenue on total trading volume of $104.3 billion for the fourth quarter of 2010. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 12.2%, compared to an estimated 9.6% for the fourth quarter of 2010.

All other revenue, which consists of technology products and services, information and user access fees, investment income and other revenue, increased slightly to $6.4 million, compared to $6.3 million for the fourth quarter of 2010.

Total expenses for the fourth quarter of 2011 increased 8.7% to $26.3 million, compared to $24.2 million for the fourth quarter of 2010. The increase in expenses during the fourth quarter of 2011 was primarily due to a 100% reserve against accounts receivable due from MF Global Inc. and a write-off of a minority investment. These two charges totaled $1.5 million, or $0.02 per share, in the aggregate.

The effective tax rate for the fourth quarter of 2011 was 38.8%, compared to 38.1% for the fourth quarter of 2010.

Employee headcount as of December 31, 2011 was 232, compared to 227 as of December 31, 2010.

Full Year 2011 Results

Total revenues for the year ended December 31, 2011 increased 23.8% to a record $181.1 million, compared to $146.2 million for 2010. Pre-tax income was a record $78.7 million, compared to $50.9 million for 2010, an increase of 54.7%. Pre-tax margin was 43.5%, compared to 34.8% for 2010. Net income totaled $47.7 million, or $1.20 per share on a diluted basis, compared to $31.4 million, or $0.80 per share on a diluted basis, for 2010.

Commission revenue for the year ended December 31, 2011 increased 27.2% to $155.4 million, compared to $122.2 million for 2010. Variable transaction fees increased 27.3% to $91.7 million on total trading volume of $525.0 billion, compared to variable transaction fees of $72.0 million on total trading volume of $402.3 billion for 2010.

All other revenue increased 6.7% to $25.7 million, compared to $24.0 million for 2010. The increase was primarily due to higher technology integration consulting services and bulk data sales.

Total expenses for the year ended December 31, 2011 increased 7.4% to $102.4 million, compared to $95.3 million for 2010. The increase was primarily due to higher employee compensation and benefits expense of $2.3 million, marketing and advertising expense of $1.8 million, and professional and consulting fees of $1.6 million. Capital spending for the year ended December 31, 2011 was $7.2 million.

The effective tax rate for 2011 was 39.4%, compared to 38.3% for 2010.

Dividend

The Company’s board of directors declared a quarterly cash dividend of $0.11 per share of common stock outstanding or issuable upon conversion of outstanding shares of non-voting common stock, to be paid on March 1, 2012 to stockholders of record as of the close of business on February 16, 2012. This represents an increase in the quarterly cash dividend of $0.02 per share.

Share Repurchase Program Update

In October 2011, the Company’s board of directors approved a $35 million share repurchase program. A total of 237,998 shares were repurchased in the fourth quarter of 2011 at a cost of $6.9 million.

Balance Sheet Data

As of December 31, 2011, total assets were $349.5 million and included $247.7 million in cash, cash equivalents and securities available-for-sale. Total stockholders’ equity as of December 31, 2011 was $312.4 million.

Guidance for 2012

The Company expects total expenses for 2012 to be in the range of $107.0 million to $112.0 million and its full year 2012 capital spending to be in the range of $8.0 million to $11.0 million. The Company also anticipates that the overall effective tax rate for 2012 will be between 39% and 41%.

Non-GAAP Financial Measure

EBITDA is a non-GAAP financial measure. The Company believes that this non-GAAP financial measure, when taken into consideration with the corresponding GAAP financial measure, is important in understanding the Company's operating results. See the attached schedule for a full reconciliation of GAAP net income to EBITDA.

Webcast and Conference Call Information

Richard M. McVey, Chairman and Chief Executive Officer, and Antonio L. DeLise, Chief Financial Officer, will host a conference call to discuss the Company’s financial results and outlook on February 1, 2012, at 10:00 a.m. Eastern time. To access the conference call, please dial 866-700-7441 (U.S.) or 617-213-8839 (international). The passcode for all callers is 47254237. 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://www.marketaxess.com. A replay of the call will be made available by dialing 888-286-8010 (U.S.) or 617-801-6888 (international) for one week after the announcement. The passcode for replay callers is 76245570. The Webcast will also be archived on http://www.marketaxess.com for 90 days following the announcement.

About MarketAxess

MarketAxess operates a leading electronic trading platform that enables investment industry professionals to efficiently trade corporate bonds and other types of fixed-income instruments. MarketAxess’ patented trading technology allows institutional investor clients to request competitive, executable bids or offers from multiple broker-dealers simultaneously, and to execute trades with the broker-dealer of their choice. Over 850 institutional investors are active users of the MarketAxess trading platform, accessing the global liquidity provided by MarketAxess’ 87 broker-dealer clients in U.S. high-grade corporate bonds, European bonds, high yield and emerging markets bonds, agency bonds, asset-backed and preferred securities and credit default swaps. MarketAxess also offers a number of trading-related products and services, including: market data to assist clients with trading decisions; connectivity solutions that facilitate straight-through processing; technology services to optimize trading environments; and execution services for exchange-traded fund managers and other clients.

MarketAxess maintains its headquarters in New York and has offices in London, Chicago and Salt Lake City. 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. Actual results in future periods may differ materially from the those currently expected or desired because of a number of risks and uncertainties, including: 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; 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; our ability to develop new products and offerings and the market’s acceptance of those products; our exposure to risks resulting from non-performance by counterparties to transactions executed between our clients in which we act as an intermediary in matching back-to-back trades; our dependence on our broker-dealer clients; our ability to enter into strategic alliances and to acquire other businesses and successfully integrate them with our business; our future capital needs and our ability to obtain capital when needed; and other factors. The Company’s actual results and financial condition may differ, perhaps materially, from the anticipated results and financial condition in any such forward-looking statements. 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.

 

MarketAxess Holdings Inc.

Consolidated Statements of Operations

 
                           
Three Months Ended Twelve Months Ended
December 31, December 31,
               
2011     2010 2011     2010
 
(In thousands, except per share data)
 
(unaudited)

Revenues

Commissions

U.S. high-grade $ 27,706 $ 22,234 $ 108,931 $ 83,796
Eurobond 4,133 4,420 17,799 18,656
Other   6,922   5,607   28,714   19,728
Total commissions 38,761 32,261 155,444 122,180
Technology products and services 3,439 3,778 14,310 13,648
Information and user access fees 1,960 1,722 7,199 6,681
Investment income 317 285 1,229 1,192
Other   658   559   2,917   2,527
Total revenues   45,135   38,605   181,099   146,228
 

Expenses

Employee compensation and benefits 13,707 13,998 58,786 56,446
Depreciation and amortization 1,793 1,552 6,781 6,350
Technology and communications 2,916 2,669 10,912 9,982
Professional and consulting fees 2,354 2,134 10,138 8,503
Occupancy 726 646 2,921 2,997
Marketing and advertising 1,380 1,009 4,882 3,075
General and administrative   3,393   2,152   7,946   7,965
Total expenses   26,269   24,160   102,366   95,318
 

Income before taxes

18,866 14,445 78,733 50,910
Provision for income taxes   7,323   5,498   31,029   19,482

Net income

$ 11,543 $ 8,947 $ 47,704 $ 31,428
 

Per Share Data:

Earnings per share:

Basic $ 0.31 $ 0.25 $ 1.29 $ 0.86
Diluted $ 0.29 $ 0.23 $ 1.20 $ 0.80
 

Cash dividends declared per common share

$ 0.09 $ 0.07 $ 0.36 $ 0.28
 

Weighted-average common shares:

Basic 37,629 32,334 37,006 33,159
Diluted 39,814 38,642 39,608 39,051
 
 

MarketAxess Holdings Inc.

Consolidated Condensed Balance Sheet Data

 
                 
December 31, 2011 December 31, 2010
 
(In thousands)
 
(unaudited)
Assets
Cash and cash equivalents $ 169,620 $ 124,994
Securities available-for-sale 78,110 72,552
Accounts receivable, net 36,170 25,682
All other assets   65,558   76,293
Total assets $ 349,458 $ 299,521
 
Liabilities and Stockholders' Equity
 
Total liabilities $ 37,019 $ 34,730
Series B Preferred Stock - 30,315
Total stockholders' equity   312,439   234,476
Total liabilities and stockholders' equity $ 349,458 $ 299,521
 
 

MarketAxess Holdings Inc.

Reconciliation of Non-GAAP Financial Measures

 
                               
Three Months Ended Twelve Months Ended
December 31, December 31,
               
2011 2010 2011 2010
($ in thousands)
 
(unaudited)
 
Net income $ 11,543 $ 8,947 $ 47,704 $ 31,428
 
Add back:
Interest expense 13 18 58 78
 
Provision for income taxes 7,323 5,498 31,029 19,482
 
Depreciation and amortization   1,793   1,552   6,781   6,350
 
Earnings before interest, taxes, depreciation
and amortization (EBITDA) $ 20,672 $ 16,015 $ 85,572 $ 57,338
 
 

MarketAxess Holdings Inc.

Volume Statistics

                       
Total Trading Volume
                   
Three Months Ended Twelve Months Ended
December 31, December 31,
               
2011 2010 2011 2010
 
(In millions)
 
(unaudited)
U.S. high-grade - multi dealer 1
fixed-rate $ 73,181 $ 61,982 $ 311,758 $ 235,698
floating-rate 2,278 1,346 11,802 7,698
Eurobond 8,042 10,780 36,933 50,251
Other1   41,699   30,215   164,514   108,610
Total $ 125,200 $ 104,323 $ 525,007 $ 402,257
 
                   
Average Daily Volume
               
Three Months Ended Twelve Months Ended
December 31, December 31,
       
2011 2010 2011 2010
 
(In millions)
 
(unaudited)
 
U.S. high-grade1 $ 1,237 $ 1,021 $ 1,294 $ 974
Eurobond 128 168 147 199
Other1   684   487   658   434
Total $ 2,049 $ 1,676 $ 2,099 $ 1,607
 
Number of U.S. Trading Days 2 61 62 250 250
Number of U.K. Trading Days 3 63 64 251 253
 
1 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 riskless principal basis between two counterparties.
 
2 The number of U.S. trading days is based on the SIFMA holiday recommendation calendar.
 
3 The number of U.K. trading days is based on the U.K. Bank holiday schedule.
 

Source: MarketAxess Holdings Inc.

Media and Investor Relations:
MarketAxess Holdings Inc.
Tony DeLise, +1-212-813-6017
or
Florencia Panizza, +1-212-813-6029
or
William McBride & Associates
William McBride, +1-917-239-6726