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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021  

or

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number 001-34091

 

MARKETAXESS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

52-2230784

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

 

55 Hudson Yards, 15th Floor New York, New York

 

10001

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (212) 813-6000

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol

 

Name of each exchange on which registered

Common Stock, $0.003 par value

 

MKTX

 

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

Emerging growth company

 

  

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.              

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of July 22, 2021, the number of shares of the Registrant’s voting common stock outstanding was 38,000,372.

 

 

 


 

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

TABLE OF CONTENTS

 

 

 

  

Page

 

PART I — Financial Information

  

 

Item 1.

Financial Statements (Unaudited)

  

3

 

Consolidated Statements of Financial Condition as of June 30, 2021 and December 31, 2020

  

3

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020

  

4

 

Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020

  

5

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020

  

6

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

  

8

 

Notes to Consolidated Financial Statements

  

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

  

44

Item 4.

Controls and Procedures

  

45

 

PART II — Other Information

  

 

Item 1.

Legal Proceedings

  

46

Item 1A.

Risk Factors

  

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

  

46

Item 3.

Defaults Upon Senior Securities

  

46

Item 4.

Mine Safety Disclosures

  

47

Item 5.

Other Information

  

48

Item 6.

Exhibits

  

48

 

 

 

 

 

 

 

 

 

 

 

2


 

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

 

As of

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(In thousands, except share

and per share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

413,612

 

 

$

460,858

 

Cash segregated under federal regulations

 

 

50,108

 

 

 

50,059

 

Investments, at fair value

 

 

35,838

 

 

 

28,111

 

Accounts receivable, net of allowance of $57 and $163 as of

   June 30, 2021 and December 31, 2020, respectively

 

 

87,125

 

 

 

79,577

 

Receivables from broker-dealers, clearing organizations and customers

 

 

475,739

 

 

 

279,915

 

Goodwill

 

 

154,789

 

 

 

147,388

 

Intangible assets, net of accumulated amortization

 

 

119,989

 

 

 

95,354

 

Furniture, equipment, leasehold improvements and capitalized

   software, net of accumulated depreciation and amortization

 

 

93,108

 

 

 

85,204

 

Operating lease right-of-use assets

 

 

73,906

 

 

 

75,924

 

Prepaid expenses and other assets

 

 

33,709

 

 

 

29,039

 

Total assets

 

$

1,537,923

 

 

$

1,331,429

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accrued employee compensation

 

$

39,278

 

 

$

62,326

 

Payables to broker-dealers, clearing organizations and customers

 

 

278,303

 

 

 

133,326

 

Income and other tax liabilities

 

 

41,345

 

 

 

42,750

 

Accounts payable, accrued expenses and other liabilities

 

 

65,872

 

 

 

44,354

 

Operating lease liabilities

 

 

91,265

 

 

 

93,612

 

Total liabilities

 

 

516,063

 

 

 

376,368

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock voting, $0.003 par value, 110,000,000 shares authorized, 40,882,143 shares and 40,851,100 shares issued and 38,008,484 shares and 38,005,330 shares outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

123

 

 

 

123

 

Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

313,683

 

 

 

329,742

 

Treasury stock - Common stock voting, at cost, 2,873,659 and 2,845,770 shares as of June 30, 2021 and December 31, 2020, respectively

 

 

(183,479

)

 

 

(169,523

)

Retained earnings

 

 

896,977

 

 

 

799,369

 

Accumulated other comprehensive loss

 

 

(5,444

)

 

 

(4,650

)

Total stockholders' equity

 

 

1,021,860

 

 

 

955,061

 

Total liabilities and stockholders' equity

 

$

1,537,923

 

 

$

1,331,429

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


 

 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands, except per share amounts)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

$

156,431

 

 

$

172,092

 

 

$

332,269

 

 

$

328,046

 

Information services

 

9,844

 

 

 

8,427

 

 

 

19,006

 

 

 

17,069

 

Post-trade services

 

9,848

 

 

 

4,054

 

 

 

20,109

 

 

 

8,207

 

Other

 

211

 

 

 

222

 

 

 

414

 

 

 

451

 

Total revenues

 

176,334

 

 

 

184,795

 

 

 

371,798

 

 

 

353,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

40,732

 

 

 

41,636

 

 

 

88,820

 

 

 

82,830

 

Depreciation and amortization

 

13,097

 

 

 

8,305

 

 

 

24,876

 

 

 

16,372

 

Technology and communications

 

10,544

 

 

 

8,592

 

 

 

20,580

 

 

 

16,753

 

Professional and consulting fees

 

10,704

 

 

 

8,065

 

 

 

20,344

 

 

 

13,740

 

Occupancy

 

3,300

 

 

 

3,286

 

 

 

6,617

 

 

 

6,760

 

Marketing and advertising

 

3,128

 

 

 

1,810

 

 

 

4,332

 

 

 

4,485

 

Clearing costs

 

4,372

 

 

 

5,713

 

 

 

9,066

 

 

 

11,223

 

General and administrative

 

3,280

 

 

 

3,253

 

 

 

6,512

 

 

 

6,386

 

Total expenses

 

89,157

 

 

 

80,660

 

 

 

181,147

 

 

 

158,549

 

Operating income

 

87,177

 

 

 

104,135

 

 

 

190,651

 

 

 

195,224

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

107

 

 

 

714

 

 

 

214

 

 

 

1,983

 

Interest expense

 

(171

)

 

 

 

 

 

(362

)

 

 

 

Other, net

 

(1,060

)

 

 

(446

)

 

 

(2,649

)

 

 

(1,102

)

Total other income (expense)

 

(1,124

)

 

 

268

 

 

 

(2,797

)

 

 

881

 

Income before income taxes

 

86,053

 

 

 

104,403

 

 

 

187,854

 

 

 

196,105

 

Provision for income taxes

 

18,765

 

 

 

20,549

 

 

 

40,109

 

 

 

37,435

 

Net income

$

67,288

 

 

$

83,854

 

 

$

147,745

 

 

$

158,670

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.79

 

 

$

2.25

 

 

$

3.94

 

 

$

4.25

 

Diluted

$

1.77

 

 

$

2.20

 

 

$

3.87

 

 

$

4.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.66

 

 

$

0.60

 

 

$

1.32

 

 

$

1.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

37,508

 

 

 

37,340

 

 

 

37,489

 

 

 

37,322

 

Diluted

 

38,104

 

 

 

38,153

 

 

 

38,129

 

 

 

38,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

4


 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands)

 

Net income

$

67,288

 

 

$

83,854

 

 

$

147,745

 

 

$

158,670

 

Net cumulative translation adjustment and foreign

   currency exchange hedge, net of tax of $(133), $121, $(546), and $2,562, respectively

 

1,138

 

 

 

(351

)

 

 

(794

)

 

 

(4,210

)

Net unrealized gain on securities available-for-sale,

   net of tax of $259 and $104, respectively

 

 

 

 

820

 

 

 

 

 

 

329

 

Comprehensive income

$

68,426

 

 

$

84,323

 

 

$

146,951

 

 

$

154,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

5


 

 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

Common

Stock

Voting

 

 

 

 

Additional

Paid-In

Capital

 

 

 

 

Treasury Stock -

Common

Stock

Voting

 

 

 

 

Retained

Earnings

 

 

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders'

Equity

 

 

 

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

$

123

 

 

 

 

$

329,742

 

 

 

 

$

(169,523

)

 

 

 

$

799,369

 

 

 

 

$

(4,650

)

 

$

955,061

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,457

 

 

 

 

 

 

 

 

80,457

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,932

)

 

 

(1,932

)

Stock-based compensation

 

 

 

 

 

 

 

7,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,424

 

Exercise of stock options

 

 

 

 

 

 

 

244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

244

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

 

 

(27,422

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,422

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

(520

)

 

 

 

 

 

 

 

 

 

 

 

 

(520

)

Cash dividend on common stock ($0.66 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,079

)

 

 

 

 

 

 

 

(25,079

)

Balance at March 31, 2021

 

 

123

 

 

 

 

 

309,988

 

 

 

 

 

(170,043

)

 

 

 

 

854,747

 

 

 

 

 

(6,582

)

 

 

988,233

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

67,288

 

 

 

 

 

 

 

 

67,288

 

Cumulative translation adjustment and foreign

currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,138

 

 

 

1,138

 

Stock-based compensation

 

 

 

 

 

 

 

6,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,134

 

Exercise of stock options

 

 

 

 

 

 

 

4,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,421

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

 

 

(6,860

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,860

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

(13,436

)

 

 

 

 

 

 

 

 

 

 

 

 

(13,436

)

Cash dividend on common stock ($0.66 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,058

)

 

 

 

 

 

 

 

(25,058

)

Balance at June 30, 2021

 

$

123

 

 

 

 

$

313,683

 

 

 

 

$

(183,479

)

 

 

 

$

896,977

 

 

 

 

$

(5,444

)

 

$

1,021,860

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

 

 


 

6


 

 

 

 

 

 

 

Common

Stock

Voting

 

 

Additional

Paid-In

Capital

 

 

Treasury Stock -

Common

Stock

Voting

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders'

Equity

 

 

 

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2020

 

$

122

 

 

$

342,541

 

 

$

(153,388

)

 

$

591,086

 

 

$

(10,270

)

 

$

770,091