MarketAxess Holdings, Inc.
Oct 26, 2011
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MarketAxess Reports Third Quarter 2011 Record Revenues of $46.6 Million, Record Pre-Tax Income of $22.3 Million and Diluted EPS of $0.34

Third Quarter Financial Highlights*
- Record revenues of $46.6 million, up 24.5%
- Record pre-tax income of $22.3 million, up 64.9%
- Record pre-tax margin of 47.9%, up from 36.1%
- EBITDA of $24.1 million, up 59.6%
- Net income of $13.4 million, up 56.1%
*All comparisons versus third quarter 2010.

NEW YORK, Oct. 26, 2011 /PRNewswire via COMTEX/ --

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 third quarter ended September 30, 2011.

"We are very pleased to report another record quarter of revenues, pre-tax income and operating margin," said Richard M. McVey, chairman and chief executive officer of MarketAxess. "This represents the 10th consecutive quarter of record results and has been driven by strong U.S. high grade market share gains and continued expense discipline."

Third Quarter Results

Total revenues for the third quarter of 2011 increased 24.5% to a record $46.6 million, compared to $37.4 million for the third quarter of 2010. Pre-tax income was a record $22.3 million, compared to $13.5 million for the third quarter of 2010, an increase of 64.9%. Pre-tax margin was 47.9%, compared to 36.1% for the third quarter of 2010. Net income totaled $13.4 million, or $0.34 per share on a diluted basis, compared to $8.6 million, or $0.22 per share on a diluted basis, for the third quarter of 2010.

Commission revenue for the third quarter of 2011 totaled $39.8 million on total trading volume of $131.7 billion, compared to $31.2 million in commission revenue on total trading volume of $100.5 billion for the third quarter of 2010. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 11.6%, compared to an estimated 8.3% for the third quarter of 2010.

Technology products and services revenue, which includes revenue for technology licenses, support and professional services, increased 9.4% to $3.8 million for the third quarter of 2011, compared to $3.5 million for the third quarter of 2010. Other revenue, which consists of information and user access fees, investment income and other revenue, increased 5.6% to $3.0 million, compared to $2.8 million for the third quarter of 2010.

Total expenses for the third quarter of 2011 increased 1.6% to $24.3 million, compared to $23.9 million for the third quarter of 2010. The increase in expenses during the third quarter of 2011 was primarily due to higher marketing and advertising expense of $0.6 million. During the third quarter of 2011, the Company's Compensation Committee modified the cash incentive bonus accrual methodology to reflect lower than expected staffing levels and higher than expected operating income. Without the adjustment, employee compensation costs for the quarter would have been approximately $1.9 million higher. For the first nine months of 2011, the total cash bonus provision is approximately 18% higher compared to the first nine months of 2010.

The effective tax rate for the third quarter of 2011 was 39.7%, compared to 36.3% for the third quarter of 2010.

Employee headcount as of September 30, 2011 was 233, compared to 223 as of September 30, 2010.

Dividend

The Company's board of directors declared a quarterly cash dividend of $0.09 per share of common stock outstanding or issuable upon conversion of outstanding shares of non-voting common stock, to be paid on November 24, 2011 to stockholders of record as of the close of business on November 10, 2011.

Share Repurchase Program

The Company's board of directors approved a $35.0 million share repurchase program, which authorizes the Company to repurchase shares of its common stock in the open market or in privately negotiated transactions, at times and prices considered appropriate by the Company.

Balance Sheet Data

As of September 30, 2011, total assets were $339.2 million and included $237.8 million in cash, cash equivalents and securities. Total stockholders' equity as of September 30, 2011 was $305.8 million.

Guidance for 2011

The Company previously expected that its full year 2011 expenses would be at the high end of the guidance range of $101.0 million to $107.0 million. Due principally to the modification in the incentive bonus accrual methodology and lower than expected staffing levels, the Company now expects full year 2011 expenses to be at the lower end of this range.

The Company now expects its full year 2011 capital spending to be in the range of $7.0 million to $8.0 million.

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 Wednesday, October 26, 2011, at 10:00 a.m. Eastern Time. To access the conference call, please dial 866-804-6925 (U.S.) or 857-350-1671 (international). The passcode for all callers is 34061897. 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 12683250. 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' 80 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


Nine Months Ended





September 30,


September 30,
















2011


2010


2011


2010





($ in thousands, except per share data)
















(unaudited)

Revenues









Commissions










U.S. high-grade

$ 28,017


$ 21,537


$ 81,225


$ 61,562



Eurobond

4,443


4,075


13,666


14,236



Other

7,362


5,540


21,792


14,121




Total commissions

39,822


31,152


116,683


89,919



Technology products and services

3,779


3,455


10,871


9,870



Information and user access fees

1,831


1,603


5,239


4,959



Investment income

303


301


912


907



Other

829


902


2,259


1,968




Total revenues

46,564


37,413


135,964


107,623












Expenses










Employee compensation and benefits

13,707


14,326


45,079


42,448



Depreciation and amortization

1,799


1,560


4,988


4,798



Technology and communications

2,772


2,543


7,996


7,313



Professional and consulting fees

2,247


2,241


7,784


6,369



Occupancy

721


706


2,195


2,351



Marketing and advertising

1,280


679


3,502


2,066



General and administrative

1,742


1,834


4,553


5,813




Total expenses

24,268


23,889


76,097


71,158












Income before taxes

22,296


13,524


59,867


36,465



Provision for income taxes

8,852


4,913


23,706


13,984

Net income

$ 13,444


$ 8,611


$ 36,161


$ 22,481












Per Share Data:









Earnings per share:










Basic

$ 0.36


$ 0.24


$ 0.98


$ 0.61



Diluted

$ 0.34


$ 0.22


$ 0.91


$ 0.57













Cash dividends declared per common share

$ 0.09


$ 0.07


$ 0.27


$ 0.21













Weighted-average common shares:










Basic

37,126


32,945


36,798


33,434



Diluted

39,828


38,744


39,539


39,188

MarketAxess Holdings Inc.

Consolidated Condensed Balance Sheet Data





September 30, 2011


December 31, 2010




($ in thousands)










(unaudited)

Assets





Cash and cash equivalents

$ 157,622


$ 124,994


Securities available-for-sale

80,200


72,552


Deferred tax assets, net

9,589


19,813


All other assets

91,789


82,162



Total assets

$ 339,200


$ 299,521







Liabilities and Stockholders' Equity





Total liabilities

$ 33,367


$ 34,730


Series B Preferred Stock

-


30,315


Total stockholders' equity

305,833


234,476



Total liabilities and stockholders' equity

$ 339,200


$ 299,521

MarketAxess Holdings Inc.

Reconciliation of Non-GAAP Financial Measures






Three Months Ended


Nine Months Ended





September 30,


September 30,
















2011


2010


2011


2010





($ in thousands)
















(unaudited)












Net income

$ 13,444


$ 8,611


$ 36,161


$ 22,481












Add back:









Interest expense

14


19


46


60













Provision for income taxes

8,852


4,913


23,706


13,984













Depreciation and amortization

1,799


1,560


4,988


4,798












Earnings before interest, taxes, depreciation









and amortization (EBITDA)

$ 24,109


$ 15,103


$ 64,901


$ 41,323

MarketAxess Holdings Inc.

Volume Statistics




Total Trading Volume












Three Months Ended


Nine Months Ended



September 30,


September 30,












2011


2010


2011


2010












($ in millions)



(unaudited)










U.S. high-grade - multi dealer(1)









fixed-rate

$ 79,233


$ 59,222


$ 238,577


$ 173,716


floating-rate

2,761


1,165


9,524


6,352

Eurobond


7,580


10,712


28,891


39,470

Other(1)


42,092


29,351


122,814


78,395

Total


$ 131,666


$ 100,450


$ 399,806


$ 297,933





















Average Daily Volume












Three Months Ended


Nine Months Ended



September 30,


September 30,












2011


2010


2011


2010












($ in millions)



(unaudited)










U.S. high-grade(1)

$ 1,281


$ 944


$ 1,313


$ 958

Eurobond


117


165


154


209

Other(1)


658


459


650


417

Total


$ 2,056


$ 1,568


$ 2,116


$ 1,584










Number of U.S. Trading Days(2)

64


64


189


188

Number of U.K. Trading Days(3)

65


65


188


189










(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.