MarketAxess Holdings, Inc.
Apr 27, 2011
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MarketAxess Reports First Quarter 2011 Record Revenue of $43.6 Million, Record Pre-Tax Income of $17.7 Million and Diluted EPS of $0.27

NEW YORK, April 27, 2011 /PRNewswire via COMTEX/ --

First Quarter Financial Highlights*

*All comparisons versus first quarter 2010.

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 first quarter ended March 31, 2011.

"Our record first quarter results reflect continuing U.S. high grade market share gains, which have expanded from 7.9% a year ago to 9.9% in the first quarter of 2011, and strong volume growth in our other product category," said Richard M. McVey, chairman and chief executive officer of MarketAxess. "Operating margins exceeded 40% for the first time and have doubled in the past two years. The pace of margin improvement is a demonstration of the significant operating leverage in our business."

First Quarter Results

Total revenues for the first quarter of 2011 increased 25.0% to $43.6 million, compared to $34.9 million for the first quarter of 2010. Pre-tax income was a record $17.7 million, compared to $11.1 million for the first quarter of 2010, an increase of 59.4%. Pre-tax margin was 40.5%, compared to 31.8% for the first quarter of 2010. Net income totaled $10.8 million, or $0.27 per share on a diluted basis, compared to $6.7 million, or $0.17 per share on a diluted basis, for the first quarter of 2010.

Commission revenue for the first quarter of 2011 totaled $37.8 million on total trading volume of $135.2 billion, compared to $29.3 million in commission revenue on total trading volume of $99.2 billion for the first quarter of 2010. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 9.9%, compared to an estimated 7.9% for the first quarter of 2010.

Technology products and services revenue, which includes revenue for technology licenses, support and professional services, totaled $3.1 million for the first quarter of 2011, compared to $3.2 million for the first quarter of 2010. Other revenue, which consists of information and user access fees, investment income and other revenue, increased 12.6% to $2.7 million, compared to $2.4 million for the first quarter of 2010.

Total expenses for the first quarter of 2011 increased 9.0% to $25.9 million, compared to $23.8 million for the first quarter of 2010. Full year 2011 expenses are now expected to be towards the upper end of the guidance range of $101 million to $107 million. The increase in expenses during the first quarter of 2011 was primarily due to higher employee compensation and benefits expense of $2.3 million and professional and consulting fees of $0.7 million, offset by a decline in general and administrative expenses of $1.1 million. The decline in general and administrative expenses was primarily due to the settlement of a favorable sales tax reimbursement claim amounting to approximately $0.7 million.

The effective tax rate for the first quarter of 2011 was 39.0%, compared to 39.5% for the first quarter of 2010.

Employee headcount as of March 31, 2011 was 232, compared to 219 as of March 31, 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 May 25, 2011 to stockholders of record as of the close of business on May 11, 2011.

Balance Sheet Data

As of March 31, 2011, total assets were $303.7 million and included $196.2 million in cash, cash equivalents and securities. Total stockholders' equity as of March 31, 2011 was $281.4 million. The Series B preferred stock was automatically converted to common stock on January 24, 2011. This conversion does not impact the computation of diluted weighted-average common shares outstanding.

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 gaining an understanding of the Company's operating results. See 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, T. Kelley Millet, president, and Antonio L. DeLise, chief financial officer, will host a conference call to discuss the Company's financial results and outlook on Wednesday, April 27, 2011, at 8:30 a.m. Eastern time. To access the conference call, please dial 800-322-2803 (U.S.) or 617-614-4925 (international). The passcode for all callers is 19552021. 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 36426874. 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 800 institutional investors are active users of the MarketAxess trading platform, accessing the global liquidity provided by MarketAxess' 81 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





March 31,












2011


2010





($ in thousands, except per share data)












(unaudited)

Revenues





Commissions






U.S. high-grade

$ 26,378


$ 19,776



Eurobond

4,617


5,492



Other

6,790


4,039




Total commissions

37,785


29,307



Technology products and services

3,108


3,164



Information and user access fees

1,689


1,634



Investment income

299


291



Other

728


488




Total revenues

43,609


34,884








Expenses






Employee compensation and benefits

16,268


13,933



Depreciation and amortization

1,562


1,616



Technology and communications

2,500


2,417



Professional and consulting fees

2,872


2,138



Occupancy

766


938



Marketing and advertising

974


628



General and administrative

1,001


2,129




Total expenses

25,943


23,799








Income before taxes

17,666


11,085



Provision for income taxes

6,886


4,384

Net income

$ 10,780


$ 6,701








Per Share Data:





Earnings per share:






Basic

$ 0.30


$ 0.18



Diluted

$ 0.27


$ 0.17









Cash dividends declared per common share

$ 0.09


$ 0.07









Weighted-average common shares:






Basic

36,507


33,626



Diluted

39,301


39,306

MarketAxess Holdings Inc.

Consolidated Condensed Balance Sheet Data




March 31, 2011


December 31, 2010




($ in thousands)










(unaudited)

Assets





Cash and cash equivalents

$ 116,567


$ 124,994


Securities available-for-sale

79,663


72,552


Deferred tax assets, net

20,241


19,813


All other assets

87,259


82,162



Total assets

$ 303,730


$ 299,521







Liabilities and Stockholders' Equity





Total liabilities

$ 22,346


$ 34,730


Series B Preferred Stock

-


30,315


Total stockholders' equity

281,384


234,476



Total liabilities and stockholders' equity

$ 303,730


$ 299,521

MarketAxess Holdings Inc.

Reconciliation of Non-GAAP Financial Measures





Three Months Ended





March 31,












2011


2010





($ in thousands)












(unaudited)








Net income

$ 10,780


$ 6,701








Add back:





Interest expense

16


21









Provision for income taxes

6,886


4,384









Depreciation and amortization

1,562


1,616








Earnings before interest, taxes, depreciation





and amortization (EBITDA)

$ 19,244


$ 12,722

MarketAxess Holdings Inc.

Volume Statistics



Total Trading Volume








Three Months Ended



March 31,








2011


2010








($ in millions)



(unaudited)






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





fixed-rate

$ 82,267


$ 58,666


floating-rate

2,938


2,845

Eurobond

11,313


16,019

Other(1)

38,661


21,672

Total

$ 135,179


$ 99,202













Average Daily Volume








Three Months Ended



March 31,








2011


2010








($ in millions)



(unaudited)






U.S. high-grade(1)

$ 1,374


$ 1,008

Eurobond

180


254

Other(1)

624


355

Total

$ 2,178


$ 1,617






Number of U.S. Trading Days(2)

62


61

Number of U.K. Trading Days(3)

63


63






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.

Media and Investor Relations Contacts:


Tony DeLise

William McBride

MarketAxess Holdings Inc.

Kreab Gavin Anderson

+1-212-813-6017

+1-212-515-1970



Florencia Panizza


MarketAxess Holdings Inc.


+1-212-813-6029


SOURCE MarketAxess Holdings Inc.