MarketAxess Reports Fourth Quarter 2021 Revenues of $165.1 Million, Operating Income of $72.6 Million and Diluted EPS of $1.37

Company Announces Increase in Regular Quarterly Dividend to $0.70 per Share, up from $0.66, and Approval of $150 Million Share Repurchase Program

Full Year 2021 Financial Highlights*

  • Record revenues of $699.0 million, up 1%; 2-year compound annual growth rate of 17%
  • Record Emerging Markets commission revenue of $104.1 million, up 17%
  • Operating income of $337.2 million, down 10%
  • Operating margin of 48.2%
  • Free cash flow of $296.7 million
  • Diluted EPS of $6.77, down 14% from $7.85
  • Estimated combined U.S. High-Grade and High-Yield market share of 19.3%; approximately 92% of credit volume on the platform was executed by institutional clients

Fourth Quarter Financial Highlights**

  • Revenues of $165.1 million, down 4%
  • Operating income of $72.6 million, down 21%
  • Diluted EPS of $1.37, down 28% from $1.91
  • Estimated combined U.S. High-Grade and High-Yield market share of 19.5%; approximately 92% of credit volume on the platform was executed by institutional clients
  • Emerging Markets volume of $160.6 billion, up 15%
  • Record estimated Eurobond market share of 13.2%, up from 11.1%
  • Record active total client firms of 1,877 and international client firms of 956

*All comparisons versus full year 2020.

**All comparisons versus fourth quarter 2020.

NEW YORK, Jan. 26, 2022 (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 quarter and year ended December 31, 2021.

“In 2021, we continued to execute our growth strategy, significantly enhancing the value of our unique liquidity solutions for clients on our global marketplace,” said Rick McVey, Chairman and CEO of MarketAxess. “We delivered strong performance across our core markets compared to pre-pandemic levels, and momentum continued to build in our newer markets, including Global EM, Munis, and Rates, where we are growing our share of the addressable e-trading opportunity. Our investments in new trading protocols and trading automation solutions continue to gain traction, driving higher trading efficiency and lower trading costs for our clients. We also benefited from strong revenue growth in Data and Post-Trade Services, reflecting their increasing importance in driving trading activity and diversifying our revenue streams. Lastly, our powerful network of clients continued to grow to a record 1,877 active client firms utilizing our global marketplace. As a result of our strong execution and continued investment in new growth drivers, we are in a great position for 2022 and beyond.”

Fourth Quarter Results

Total revenues for the fourth quarter of 2021 decreased 3.7% to $165.1 million, compared to $171.3 million for the fourth quarter of 2020. Operating income was $72.6 million, compared to $91.7 million for the fourth quarter of 2020, a decrease of 20.8%. Operating margin was 44.0%, compared to 53.5% for the fourth quarter of 2020. Net income totaled $52.2 million, or $1.37 per share on a diluted basis, compared to $72.9 million, or $1.91 per share, for the fourth quarter of 2020.

Commission revenue for the fourth quarter of 2021 decreased 6.4% to $145.9 million, compared to $155.8 million for the fourth quarter of 2020. Variable transaction fees decreased 11.0% to $113.9 million for the fourth quarter of 2021, compared to variable transaction fees of $128.0 million for the fourth quarter of 2020. Commission revenue includes $1.2 million generated by MuniBrokers, which was acquired in April 2021. Combined U.S. high-grade and high-yield trading volume as a percentage of FINRA’s combined high-grade and high-yield TRACE trading volume was an estimated 19.5% for the fourth quarter of 2021, compared to an estimated 21.1% for the fourth quarter of 2020.

All other revenue, which consists of information services, post-trade services and other revenue, increased to $19.1 million, compared to $15.5 million for the fourth quarter of 2020. The $3.6 million increase in all other revenue was principally due to an incremental $1.8 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub which was acquired on November 30, 2020 and $0.8 million of revenue due to new data contracts.

Total expenses for the fourth quarter of 2021 increased 16.1% to $92.5 million, compared to $79.6 million for the fourth quarter of 2020. The increase in total expenses was largely due to higher employee compensation and benefit costs of $4.7 million, mainly due to an increase in headcount; higher depreciation and amortization of $4.0 million, which includes acquired intangibles expense of $1.8 million; and higher technology and communications costs of $2.3 million which was partially offset by a decrease in clearing costs of $1.3 million. Expenses in the fourth quarter of 2021 reflect incremental operating expenses and costs associated with the MuniBrokers and Regulatory Reporting Hub businesses totaling $5.0 million. Excluding the MuniBrokers and Regulatory Reporting Hub expenses, total expenses for the quarter were up 10.1%.

The effective tax rate for the fourth quarter of 2021 was 27.1%, compared to 19.2% for the fourth quarter of 2020. The higher effective tax rate for the fourth quarter of 2021 was due to lower excess tax benefits and return-to-provision adjustments. The income tax provision for the fourth quarter of 2021 and 2020 reflected $0.3 million and $6.2 million, respectively, of excess tax benefits related to share-based compensation awards.

Full Year 2021 Results

Total revenues for the year ended December 31, 2021 increased 1.4% to a record $699.0 million, compared to $689.1 million for 2020. Operating income was $337.2 million, compared to $374.7 million for 2020, a decrease of 10.0%. Operating margin was 48.2%, compared to 54.4% for 2020. Net income totaled $257.9 million, or $6.77 per share on a diluted basis, compared to $299.4 million, or $7.85 per share, for 2020.

Commission revenue for the year ended December 31, 2021 decreased 2.1% to $621.0 million, compared to $634.4 million for 2020. Variable transaction fees decreased 4.7% to $501.6 million, compared to variable transaction fees of $526.3 million for 2020. Commission revenue includes $3.5 million generated by MuniBrokers, which was acquired in April 2021. Combined U.S. high-grade and high-yield trading volume as a percentage of FINRA’s combined high-grade and high-yield TRACE trading volume was an estimated 19.3% for the year ended December 31, 2021, compared to an estimated 19.5% for 2020.

All other revenue, which consists of information services, post-trade services and other revenue, increased 42.5% to $77.9 million in 2021, compared to $54.7 million for 2020. The $23.3 million increase in all other revenue was principally due to an incremental $13.0 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub which was acquired on November 30, 2020 and $3.8 million of revenue due to new data contracts.

Total expenses for the year ended December 31, 2021 increased 15.1% to $361.7 million, compared to $314.4 million for 2020. The increase in total expenses was principally due to higher depreciation and amortization of $17.5 million, which includes acquired intangibles expense of $9.7 million; higher employee compensation and benefits costs of $14.0 million, mainly due to an increase in headcount; professional and consulting fees of $9.6 million; technology and communications costs of $8.4 million; offset by a decrease in clearing costs of $5.0 million. Expenses in 2021 reflect incremental operating expenses and costs associated with the MuniBrokers and Regulatory Reporting Hub businesses totaling $21.9 million. Excluding MuniBrokers and Regulatory Reporting Hub expenses, total expenses for the year were up 8.1%.

The effective tax rate for 2021 was 22.8%, compared to 20.0% for 2020. The income tax provision for 2021 and 2020 reflected $11.7 million and $24.1 million, respectively, of excess tax benefits related to share-based compensation awards.

Employee headcount was 676 as of December 31, 2021 compared to 606 as of December 31, 2020. The increase in headcount was due to the continued investment in the Company’s growth initiatives, including geographic expansion, trading automation, new trading protocols and the transition to self-clearing.

Dividend

The Company’s board of directors declared a 6% increase in the quarterly cash dividend to $0.70 per share of common stock outstanding, to be paid on February 23, 2022 to stockholders of record as of the close of business on February 9, 2022.

Share Repurchases

A total of 111,694 shares were repurchased in the fourth quarter of 2021 at a cost of $45.0 million. In January 2022, the Board of Directors authorized a new repurchase program for up to $150.0 million of the Company’s common stock. The Company expects repurchases under the new program to commence in the first quarter of 2022.

Balance Sheet Data

As of December 31, 2021, total assets were $1.5 billion and included $542.8 million in cash, cash equivalents and investments.   Total stockholders’ equity as of December 31, 2021 was $1.0 billion.

Guidance for 2022

For 2022, the Company is providing the following guidance:

  • Expenses are expected to be in the range of $385.0 million to $415.0 million. Based on the midpoint of the stated guidance range, operating expenses are expected to increase by approximately 11% in 2022.
  • Capital expenditures are expected to be in the range of $58.0 million to $62.0 million and include an expected increase in capitalized software development to support new protocols, products and trading platform enhancements.
  • The Company’s overall effective tax rate is expected to be between 24.0% to 26.0% and reflects a lower benefit from estimated excess tax benefits on share-based compensation awards.

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”) and free cash flow. 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 and GAAP cash flow from operating activities to free cash flow.

Webcast and Conference Call Information

Rick McVey, Chairman and Chief Executive Officer, Chris Concannon, President and Chief Operating Officer and Christopher Gerosa, Chief Financial Officer, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, January 26, 2022 at 10:00 a.m. EST. 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) and using the conference ID: 2650986 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, institutional electronic trading platform delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income markets. A global network of over 1,800 firms, including the world’s leading asset managers and institutional broker-dealers, leverages MarketAxess’ patented trading technology to efficiently trade bonds. MarketAxess’ award-winning Open Trading® marketplace is regarded as the preferred all-to-all trading solution in the global credit markets, creating a unique liquidity pool for a broad range of credit market participants. Drawing on its deep data and analytical resources, MarketAxess provides automated trading solutions, market data products and a range of pre- and post-trade services. 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: global economic, political and market factors; 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 and existing 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.

Media and Investor Relations Contacts:

David Cresci
MarketAxess Holdings Inc.
+1-212-813-6027
  William McBride
RF|Binder
+1-917-239-6726
     
Kyle White
MarketAxess Holdings Inc.
+1-212-813-6355
   


MarketAxess Holdings Inc.
Consolidated Statements of Operations
 
                               
           
  Three Months Ended     Year Ended  
  December 31,     December 31,  
  2021     2020     2021     2020  
  (In thousands, except per share data)  
  (unaudited)  
                               
Revenues                              
Commissions $ 145,913     $ 155,813     $ 621,008     $ 634,445  
Information services   9,561       8,771       38,175       34,341  
Post-trade services   9,369       6,564       38,922       19,460  
Other   217       198       846       879  
Total revenues   165,060       171,346       698,951       689,125  
                               
Expenses                              
Employee compensation and benefits   41,218       36,472       170,916       156,885  
Depreciation and amortization   14,607       10,592       53,447       35,996  
Technology and communications   11,229       8,922       42,474       34,092  
Professional and consulting fees   10,734       10,295       41,925       32,304  
Occupancy   3,438       3,220       13,320       13,425  
Marketing and advertising   2,906       2,307       9,059       7,940  
Clearing costs   3,739       4,997       16,074       21,058  
General and administrative   4,608       2,844       14,501       12,697  
Total expenses   92,479       79,649       361,716       314,397  
Operating income   72,581       91,697       337,235       374,728  
Other income (expense)                              
Investment income   79       119       401       2,446  
Interest expense   (166 )     (96 )     (842 )     (1,142 )
Other, net   (919 )     (1,431 )     (2,871 )     (1,673 )
Total other income (expense)   (1,006 )     (1,408 )     (3,312 )     (369 )
Income before income taxes   71,575       90,289       333,923       374,359  
Provision for income taxes   19,390       17,358       76,035       74,982  
Net income $ 52,185     $ 72,931     $ 257,888     $ 299,377  
                               
                               
Per Share Data:                              
Net income per common share                              
Basic $ 1.39     $ 1.95     $ 6.88     $ 8.01  
Diluted $ 1.37     $ 1.91     $ 6.77     $ 7.85  
                               
Cash dividends declared per common share $ 0.66     $ 0.60     $ 2.64     $ 2.40  
                               
Weighted-average common shares:                              
Basic   37,527       37,405       37,508       37,359  
Diluted   38,046       38,188       38,097       38,144  


MarketAxess Holdings Inc.
Commission Revenue Details
 
                               
                               
  Three Months Ended     Year Ended  
  December 31,     December 31,  
  2021     2020     2021     2020  
                               
  Total Commissions Revenue  
  (In thousands)  
  (unaudited)  
                               
Transaction Fees                              
U.S. high-grade $ 46,173     $ 59,645     $ 213,790     $ 253,684  
Other credit 1   62,767       65,045       271,215       256,763  
Total credit   108,940       124,690       485,005       510,447  
Rates 2   4,992       3,267       16,572       15,890  
Total transaction fees   113,932       127,957       501,577       526,337  
                               
Distribution Fees                              
U.S. high-grade   22,665       21,524       87,265       81,893  
Other credit1   9,262       6,261       31,913       25,834  
Total credit   31,927       27,785       119,178       107,727  
Rates2   54       71       253       381  
Total distribution fees   31,981       27,856       119,431       108,108  
Total commissions $ 145,913     $ 155,813     $ 621,008     $ 634,445  
                               
                               
  Average Variable Transaction Fee Per Million  
  (unaudited)  
                               
U.S. high-grade - fixed-rate $ 171.56     $ 193.51     $ 176.91     $ 191.34  
U.S. high-grade - floating-rate   43.08       40.14       42.36       48.21  
Total U.S. high-grade   166.15       187.27       171.97       185.40  
Other credit 1   192.23       202.55       196.30       203.45  
Total credit   180.24       194.94       184.78       194.06  
                               
Rates2   4.14       3.95       4.00       3.99  
                               
                               
1 Other credit includes high-yield, emerging markets, Eurobonds and municipal bonds.  
2 Rates includes U.S. Government bonds, agencies and other government bonds.  
       


MarketAxess Holdings Inc.
Consolidated Condensed Balance Sheet Data
 
               
               
  As of  
  December 31, 2021     December 31, 2020  
  (In thousands)  
  (unaudited)  
               
Assets              
Cash and cash equivalents $ 506,735     $ 460,858  
Cash segregated under federal regulations   50,159       50,059  
Investments, at fair value   36,078       28,111  
Accounts receivable, net   63,881       79,577  
Receivables from broker-dealers, clearing organizations and customers   408,346       279,915  
Goodwill   154,789       147,388  
Intangible assets, net of accumulated amortization   116,377       95,354  
Furniture, equipment, leasehold improvements and capitalized software, net   96,061       85,204  
Operating lease right-of-use assets   70,960       75,924  
Prepaid expenses and other assets   27,066       29,039  
Total assets $ 1,530,452     $ 1,331,429  
               
Liabilities and stockholders' equity              
Liabilities              
Accrued employee compensation $ 59,719     $ 62,326  
Payables to broker-dealers, clearing organizations and customers   229,325       133,326  
Income and other tax liabilities   40,456       42,750  
Accounts payable, accrued expenses and other liabilities   71,218       44,354  
Operating lease liabilities   88,425       93,612  
Total liabilities   489,143       376,368  
               
Stockholders' equity              
Common stock   123       123  
Additional paid-in capital   330,262       329,742  
Treasury stock   (232,712 )     (169,523 )
Retained earnings   956,966       799,369  
Accumulated other comprehensive loss   (13,330 )     (4,650 )
Total stockholders' equity   1,041,309       955,061  
Total liabilities and stockholders' equity $ 1,530,452     $ 1,331,429  
               


MarketAxess Holdings Inc.
Reconciliation of Non-GAAP Financial Measures
 
                               
                               
  Three Months Ended     Year Ended  
  December 31,     December 31,  
  2021     2020     2021     2020  
                               
  Earnings Before Interest, Taxes, Depreciation and Amortization  
  (In thousands)  
  (unaudited)  
Net income $ 52,185     $ 72,931     $ 257,888     $ 299,377  
Add back:                              
Interest expense   166       96       842       1,142  
Provision for income taxes   19,390       17,358       76,035       74,982  
Depreciation and amortization   14,607       10,592       53,447       35,996  
Earnings before interest, taxes, depreciation and amortization $ 86,348     $ 100,977     $ 388,212     $ 411,497  
                               
  Free Cash Flow  
  (In thousands)  
  (unaudited)  
Cash flows from operating activities $ 145,711     $ 227,620     $ 282,091     $ 404,489  
Exclude: Net change in trading investments   5       (5,316 )     5,574       (67,952 )
Exclude: Net change in fail-to-deliver/receive from broker-dealers, clearing organizations and customers   (62,318 )     (115,519 )     59,651       49,278  
Less: Purchases of furniture, equipment and leasehold improvements   (2,926 )     (1,988 )     (17,493 )     (15,010 )
Less: Capitalization of software development costs   (8,473 )     (9,494 )     (33,123 )     (30,618 )
Free cash flow $ 71,999     $ 95,303     $ 296,700     $ 340,187  


MarketAxess Holdings Inc.
Volume Statistics*
 
                               
                               
  Three Months Ended
December 31,
    Year Ended
December 31,
 
  2021     2020     2021     2020  
                               
  Total Trading Volume  
  (In millions)  
  (unaudited)  
                               
U.S. high-grade - fixed-rate $ 266,182     $ 305,537     $ 1,197,526     $ 1,311,512  
U.S. high-grade - floating-rate   11,709       12,956       45,654       56,786  
Total U.S. high-grade   277,891       318,493       1,243,180       1,368,298  
Other credit   326,512       321,135       1,381,604       1,262,074  
Total credit   604,403       639,628       2,624,784       2,630,372  
                               
Rates   1,206,095       826,276       4,144,964       3,987,424  
                               
  Average Daily Volume  
  (In millions)  
  (unaudited)  
U.S. high-grade $ 4,482     $ 5,137     $ 4,973     $ 5,451  
Other credit   5,229       5,140       5,511       5,014  
Total credit   9,711       10,277       10,484       10,465  
                               
Rates   19,447       13,327       16,579       15,886  
                               
Number of U.S. Trading Days 1   62       62       250       251  
Number of U.K. Trading Days 2   64       64       253       254  
                               
                               
   
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 matched principal basis between two counterparties. Consistent with industry standards, U.S. Government Bond trades are single-counted.  

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Source: MarketAxess Holdings, Inc.