MarketAxess Holdings, Inc.
Jan 27, 2016
PDF
Add to Briefcase

MarketAxess Reports Fourth Quarter 2015 Revenues of $76.6 Million, Pre-Tax Income of $37.0 Million and Diluted EPS of $0.65

Company Announces 30% Increase in Regular Quarterly Dividend to $0.26 Per Share, Up From $0.20

Fourth Quarter Financial Highlights*

*All comparisons versus fourth quarter 2014.

Full Year 2015 Financial Highlights**

**All comparisons versus full year 2014.

NEW YORK, Jan. 27, 2016 (GLOBE NEWSWIRE) -- MarketAxess Holdings Inc. (Nasdaq:MKTX), 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 fourth quarter and full year ended December 31, 2015.

"Fourth quarter and full year earnings results show continued strong growth, driven by an acceleration of market share gains across core products.  The expansion of our liquidity pool through all-to-all Open Trading is further reducing transaction costs for our clients, fueling rapid growth in electronic order flow," said Richard M. McVey, Chairman and CEO of MarketAxess. "We are actively investing to expand the global credit products available for trading on our market leading technology platform."

Fourth Quarter Results

Total revenues for the fourth quarter of 2015 increased 9.2% to $76.6 million, compared to $70.2 million for the fourth quarter of 2014.  Pre-tax income was $37.0 million, compared to $33.5 million for the fourth quarter of 2014, an increase of 10.4%.  Pre-tax margin was 48.3%, compared to 47.7% for the fourth quarter of 2014.  Net income totaled $24.5 million, or $0.65 per share on a diluted basis, compared to $21.6 million, or $0.57 per share for the fourth quarter of 2014.

Commission revenue for the fourth quarter of 2015 increased 12.0% to a record $67.6 million, compared to $60.4 million for the fourth quarter of 2014 principally due to growth in variable transaction fees.  Variable transaction fees increased 16.3% to $51.3 million on total trading volume of $250.4 billion for the fourth quarter of 2015, compared to variable transaction fees of $44.1 million on total trading volume of $211.4 billion for the fourth quarter of 2014. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 17.6% on an adjusted basis, compared to an estimated 16.1% for the fourth quarter of 2014. See Non-GAAP Financial Measures and Other Items below for further information on FINRA TRACE volume and U.S. high-grade market share.

All other revenue, which consists of information and post-trade services, technology products and services, investment income and other revenue, decreased to $9.0 million, compared to $9.8 million for the fourth quarter of 2014.  Lower technology-related professional consulting services fees and the unfavorable impact of the strengthening U.S. dollar accounted for the decline in all other revenue.

Total expenses for the fourth quarter of 2015 increased 8.1% to $39.7 million, compared to $36.7 million for the fourth quarter of 2014. The increase in total expenses was principally due to higher employee compensation and benefits costs of $1.7 million and clearing costs of $0.6 million.

The effective tax rate for the fourth quarter of 2015 was 33.8%, compared to 35.4% for the fourth quarter of 2014. The lower effective tax rate was principally due to a shift in income to lower tax jurisdictions and a reduction in statutory foreign and state tax rates.  Similar to the fourth quarter of 2014, the income tax provision for the fourth quarter of 2015 includes a benefit for certain tax credits amounting to approximately $0.4 million, or $0.01 per diluted share.

Employee headcount was 342 as of December 31, 2015, compared to 303 as of December 31, 2014.

Full Year 2015 Results

Total revenues for the year ended December 31, 2015 increased 15.3% to a record $303.1 million, compared to $262.8 million for 2014.  Pre-tax income was a record $147.9 million, compared to $118.5 million for 2014, an increase of 24.8%.  Pre-tax margin was 48.8%, compared to 45.1% for 2014.  Net income totaled $96.0 million, or $2.55 per share on a diluted basis, compared to $74.8 million, or $1.97 per share for 2014. 

Commission revenue for the year ended December 31, 2015 increased 20.4% to a record $266.2 million, compared to $221.1 million for 2014 principally due to growth in variable transaction fees. Variable transaction fees increased 28.8% to $201.3 million on total trading volume of $978.5 billion, compared to variable transaction fees of $156.2 million on total trading volume of $767.0 billion for 2014.  U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 16.8% in 2015 on an adjusted basis, compared to an estimated 14.5% in 2014. See Non-GAAP Financial Measures and Other Items below for further information on FINRA TRACE volume and U.S. high-grade market share.

All other revenue decreased 11.4% to $36.9 million in 2015, compared to $41.6 million for 2014. Lower technology-related professional consulting services fees and the unfavorable impact of the strengthening U.S. dollar accounted for the decline in all other revenue.

Total expenses for the year ended December 31, 2015 increased 7.6% to $155.2 million, compared to $144.2 million for 2014.  The increase in total expenses was principally due to higher employee compensation and benefits costs of $8.9 million resulting from an increase in incentive and stock-based compensation costs and employee headcount.

Capital spending for the year ended December 31, 2015 was $15.4 million compared to $14.8 million in 2014.

The effective tax rate for 2015 was 35.1%, compared to 36.9% for 2014.  The lower effective tax rate was principally due to a shift in income to lower tax jurisdictions and a reduction in statutory foreign and state tax rates.

Dividend

The Company's board of directors declared a 30% increase in the quarterly cash dividend to $0.26 per share of common stock outstanding, to be paid on February 25, 2016 to stockholders of record as of the close of business on February 11, 2016.

Share Repurchase Program

A total of 32,700 shares were repurchased in the fourth quarter of 2015 at a cost of $3.1 million under the Company's existing share repurchase program, which expires on February 29, 2016.  In January 2016, the Company's board of directors authorized a new two-year $25.0 million share repurchase program. 

Balance Sheet Data

As of December 31, 2015, total assets were $439.0 million and included $284.4 million in cash, cash equivalents and securities available-for-sale.  Total stockholders' equity as of December 31, 2015 was $390.7 million.

Guidance for 2016

The Company expects total expenses for 2016 to be in the range of $168.0 million to $176.0 million and its capital spending for 2016 to be in the range of $18.0 million to $22.0 million.  The Company also anticipates that the overall effective tax rate for 2016 will be between 34% and 36%.

Non-GAAP Financial Measures and Other Items

To supplement the Company's unaudited financial statements presented in accordance with generally accepted accounting principles ("GAAP"), the Company uses certain non-GAAP measures of financial performance, including earnings before interest, taxes, depreciation and amortization ("EBITDA").  The Company believes that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in understanding the Company's operating results.  See the attached schedule for a reconciliation of GAAP net income to EBITDA.

For purposes of calculating U.S. high-grade estimated market share, FINRA TRACE volumes have been adjusted to eliminate the increased reporting of affiliate back-to-back trade to FINRA beginning in April 2015 and the inclusion of 144A securities beginning in July 2015.  Based on information provided by FINRA, the Company believes that the adjusted FINRA TRACE volumes provide a more accurate comparison to prior period reporting.  The Company has provided a reconciliation of U.S. high-grade TRACE volumes to the adjusted U.S. high-grade TRACE volumes on the "Investor Relations-Volume" section of its website.

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, January 27, 2016, at 10:00 a.m. Eastern time. To access the conference call, please dial 855-425-4206 (U.S.) or 484-756-4249 (international). 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://investor.marketaxess.com. A replay of the call will be made available by dialing 855-859-2056 (U.S.) or 404-537-3406 (international) for one week after the announcement. The Webcast will also be archived on http://investor.marketaxess.com for 90 days following the announcement.

About MarketAxess

MarketAxess operates a leading electronic trading platform that enables fixed-income market participants to efficiently trade corporate bonds and other types of fixed-income instruments using MarketAxess' patented trading technology.  Over 1,000 institutional investor and broker-dealer firms are active users of the MarketAxess trading platform, accessing global liquidity in U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit default swaps and other fixed-income securities. MarketAxess SEF Corporation has received temporary registration from the U.S. Commodity Futures Trading Commission to operate a swap execution facility.  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.  Through its Trax® division, MarketAxess also offers a range of pre- and post-trade services, including trade matching, regulatory transaction reporting and market and reference data, across a range of fixed-income products.  Trax is the trading name of Xtrakter Ltd., a MarketAxess group company.

MarketAxess maintains its headquarters in New York and has offices in London, Boston, Chicago, Los Angeles, Miami, Salt Lake City, San Francisco, São Paulo, Hong Kong and Singapore. 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.  The Company's actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including: the volatility of financial services markets generally; 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; 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; our ability to introduce new fee plans and our clients' response; our exposure to risks resulting from non-performance by counterparties to transactions executed between our clients in which we act as an intermediary in matched principal trades; our dependence on our broker-dealer clients; the loss of any of our significant institutional investor clients; our ability to develop new products and offerings and the market's acceptance of those products; the effect of rapid market or technological changes on us and the users of our technology; our ability to successfully maintain the integrity of our trading platform and our response to system failures, capacity constraints and business interruptions; our vulnerability to cyber security risks; our ability to protect our intellectual property rights or technology and defend against intellectual property infringement or other claims; our ability to enter into strategic alliances and to acquire other businesses and successfully integrate them with our business; our ability to comply with new laws, rules and regulations both domestically and internationally; our ability to maintain effective compliance and risk management methods; the strain of growth initiatives on management and other resources; our future capital needs and our ability to obtain capital when needed; limitations on our operating flexibility contained in our credit agreement; and other factors.  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 December 31,  Twelve Months Ended December 31, 
  2015   2014   2015   2014  
                 
 (In thousands, except per share data) 
 (unaudited) 
Revenues        
Commissions$  67,613  $  60,372  $  266,221  $  221,138  
Information and post-trade services   7,678     7,869     30,660     31,510  
Technology products and services   708     1,289     3,573     6,874  
Investment income   284     127     905     543  
Other   361     510     1,739     2,709  
Total revenues   76,644     70,167     303,099     262,774  
         
Expenses        
Employee compensation and benefits   21,087     19,376     83,856     74,995  
Depreciation and amortization   4,685     4,425     18,542     17,379  
Technology and communications   3,720     4,385     15,916     17,685  
Professional and consulting fees   3,540     3,463     13,043     14,375  
Occupancy   1,215     1,063     4,685     4,381  
Marketing and advertising   1,888     1,429     6,148     5,769  
General and administrative1   3,523     2,537     13,008     9,654  
Total expenses   39,658     36,678     155,198     144,238  
         
Income before taxes   36,986     33,489     147,900     118,536  
Provision for income taxes   12,495     11,853     51,863     43,730  
Net income$   24,491   $   21,636   $   96,037  $   74,806   
         
         
Per Share Data:        
Net income per common share        
Basic$  0.67  $  0.59  $  2.62  $  2.03  
Diluted$  0.65  $  0.57  $  2.55  $  1.97  
         
Cash dividends declared per common share$  0.20  $  0.16  $  0.80  $  0.64  
         
Weighted-average common shares:        
Basic   36,673     36,729     36,690     36,930  
Diluted   37,638     37,711     37,637     37,889  
         
         
         
1 Includes clearing costs of $1.1 million and $0.5 million for the three months ended December 31, 2015 and 2014, respectively, and $3.3 million and $1.3 million for the twelve months ended December 31, 2015 and 2014, respectively. 
 
         

 



MarketAxess Holdings Inc.
Commission Revenue Details
        
 Three Months Ended December 31, Twelve Months Ended December 31,
  2015   2014   2015   2014 
        
  Total Commissions Revenues 
 (In millions)
 (unaudited)
Transaction Fees       
U.S. High-Grade$  24,686  $  23,146  $  101,348  $  83,211 
Other Credit 1   26,002     20,245     97,323     70,183 
Liquid Products 2   606     724     2,595     2,840 
Total Transaction Fees   51,294     44,115     201,266     156,234 
        
Distribution Fees       
U.S. High-Grade   14,665     14,441     58,075     56,659 
Other Credit1   1,439     1,609     5,839     7,538 
Liquid Products3   215     207     1,041     707 
Total Distribution Fees   16,319     16,257     64,955     64,904 
Total Commissions$   67,613   $   60,372   $   266,221   $   221,138  
        
        
  Average Variable Transaction Fee Per Million 
 (unaudited)
U.S. high-grade - fixed-rate$  180  $  186  $  182  $  182 
U.S. high-grade - floating-rate   33     45     42     51 
Total U.S. high-grade    172     178     175     175 
Other credit   285     315     290     311 
Liquid products    38     42     40     43 
Total   205      209      206      204  
        
        
1 Other Credit includes high-yield, emerging markets, Eurobonds and structured products bonds.  
2 Liquid Products includes U.S. agencies and European government bonds.    
3 Includes CDS SEF-related revenue.      

 



 

MarketAxess Holdings Inc.
 Consolidated Condensed Balance Sheet Data
       
 As of 
   December 31, 2015 December 31, 2014 
       
   (In thousands) 
   (unaudited) 
Assets    
 Cash and cash equivalents$  199,728  $  168,924  
 Securities available-for-sale   84,706     64,863  
 Accounts receivable, net   40,459     33,836  
 All other assets   114,148     112,261  
  Total assets$  439,041  $  379,884  
       
Liabilities and Stockholders' Equity     
 Total liabilities   48,328     45,676  
 Total stockholders' equity   390,713     334,208  
  Total liabilities and stockholders' equity$  439,041  $  379,884  
       

 




MarketAxess Holdings Inc.
Reconciliation of Non-GAAP Financial Measures
Earnings Before Interest, Taxes, Depreciation and Amortization
         
 Three Months Ended  Twelve Months Ended 
 December 31, December 31, 
  2015   2014   2015   2014  
                 
 (In thousands) 
 (unaudited) 
   
Net income $  24,491  $  21,636  $  96,037  $  74,806  
Add back:        
         
Interest expense -   -   -   -  
                 
Provision for income taxes   12,495     11,853     51,863     43,730  
                 
Depreciation and amortization   4,685     4,425     18,542     17,379  
                 
Earnings before interest, taxes, depreciation and amortization $   41,671   $   37,914   $   166,442   $   135,915   
         

 



MarketAxess Holdings Inc.
Volume Statistics
         
 Three Months Ended December 31, Twelve Months Ended December 31, 
  2015   2014   2015   2014  
         
  Total Trading Volume  
 (In millions) 
 (unaudited) 
U.S. high-grade - fixed-rate$  136,015  $  122,899  $  549,086  $  450,139  
U.S. high-grade - floating-rate   7,234     7,295     28,547     25,231  
Total U.S. high-grade    143,249     130,194     577,633     475,370  
Other credit   91,257     64,211     335,513     226,033  
Liquid products    15,864     16,964     65,365     65,558  
Total$   250,370   $   211,369   $   978,511   $   766,961   
         
  Average Daily Volume  
 (In millions) 
 (unaudited) 
U.S. high-grade$  2,310  $  2,100  $  2,311  $  1,901  
Other credit   1,462     1,029     1,338     902  
Liquid products    256     274     261     262  
Total$   4,028   $   3,403   $   3,910   $   3,065   
         
Number of U.S. Trading Days 1   62     62     250     250  
Number of U.K. Trading Days 2   64     64     253     253  
         
         
1 The number of U.S. trading days is based on the SIFMA holiday recommendation calendar.   
2 The number of U.K. trading days is based on the U.K. Bank holiday schedule.    
         
*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. 
 
         

 

 

Media and Investor Relations Contacts:

Tony DeLise                                                                         
MarketAxess Holdings Inc.                                       
+1-212-813-6017                                                     

Florencia Panizza
MarketAxess Holdings Inc.
+1-212-813-6029

William McBride
Bryant Park Financial Communications
+1-917-239-6726