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8-K - FORM 8-K - MARKETAXESS HOLDINGS INCd714204d8k.htm

Exhibit 99.1

 

LOGO

MARKETAXESS REPORTS FIRST QUARTER 2014 REVENUES OF $63.4 MILLION,

PRE-TAX INCOME OF $27.7 MILLION AND DILUTED EPS OF $0.46

First Quarter Financial Highlights*

 

    Revenues of $63.4 million, up 18.2%

 

    Pre-tax income of $27.7 million, up 12.3%

 

    Diluted EPS from continuing operations of $0.46, up from $0.41

 

    Total trading volume of $187.4 billion, up 16.9%; record average daily trading volume of $3.1 billion

 

    Estimated U.S. high-grade market share of 13.4%, up from 12.3%

 

*  All comparisons versus first quarter 2013.

NEW YORK, April 23, 2014 – 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 first quarter ended March 31, 2014.

“Trading volumes were very strong this quarter with record quarterly average daily volume in U.S. high-grade and other credit products. Client trading momentum was evident in both the U.S. and Europe in spite of the robust new issue calendar and the reduction of credit spreads and yields during the quarter,” said Rick McVey, Chairman and Chief Executive Officer of MarketAxess. “New solutions on the trading system continue to gain traction, and our integration of the Xtrakter business is on track in Europe.”

First Quarter Results from Continuing Operations

Total revenues for the first quarter of 2014 increased 18.2% to $63.4 million, compared to $53.7 million for the first quarter of 2013. Pre-tax income was $27.7 million, compared to $24.7 million for the first quarter of 2013, an increase of 12.3%. Pre-tax margin was 43.7%, compared to 46.0% for the first quarter of 2013. Net income totaled $17.5 million, or $0.46 per share on a diluted basis, compared to $15.5 million, or $0.41 per share on a diluted basis, for the first quarter of 2013.

Commission revenue for the first quarter of 2014 totaled $52.0 million on total trading volume of $187.4 billion, compared to $47.2 million in commission revenue on total trading volume of $160.4 billion for the first quarter of 2013. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 13.4%, compared to an estimated 12.3% for the first quarter of 2013. The decline in the U.S. high-grade average fee per million to $167 in the first quarter of 2014 from $191 in the first quarter of 2013 was principally due to the lower duration of bonds traded coupled with a shift to larger sized trades.

 

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All other revenue, which consists of information and post-trade services, technology products and services, investment income and other revenue, increased 76.5.% to $11.4 million, compared to $6.5 million for the first quarter of 2013. The increase in all other revenue was principally due to the inclusion of a full quarter of results in 2014 from Xtrakter Limited (“Xtrakter”), which was acquired on February 28, 2013.

Total expenses for the first quarter of 2014 increased 23.2% to $35.7 million, compared to $29.0 million for the first quarter of 2013. The increase in total expenses was principally due to higher employee compensation and benefits costs of $3.6 million, depreciation and amortization of $1.8 million and technology and communication costs of $1.3 million. The overall expense increase reflects the inclusion of a full quarter of operating expenses in 2014 from Xtrakter.

The effective tax rate for the first quarter of 2014 was 36.9%, compared to 37.0% for the first quarter of 2013.

Employee headcount as of March 31, 2014 was 300, compared to 273 as of March 31, 2013.

Dividend

The Company’s board of directors declared a quarterly cash dividend of $0.16 per share of common stock outstanding, to be paid on May 22, 2014 to stockholders of record as of the close of business on May 8, 2014.

Share Repurchase Program Update

In January 2014, the Company’s board of directors approved a $35.0 million share repurchase program. A total of 54,000 shares were repurchased in the first quarter of 2014 at a cost of $3.4 million.

Balance Sheet Data

As of March 31, 2014, total assets were $346.4 million and included $193.5 million in cash, cash equivalents and securities available-for-sale. Total stockholders’ equity as of March 31, 2014 was $318.3 million.

Non-GAAP Financial Measures

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 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, April 23, 2014, at 10:00 a.m. Eastern time. To access the conference call, please dial +1 855 425 4206 (U.S.) or +1 484 756 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 +1 855 859 2056 (U.S.) or +1 404 537 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.

 

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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 Xtrakter subsidiary, 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.

MarketAxess maintains its headquarters in New York and has offices in London, Boston, Chicago, Los Angeles, Salt Lake City, São Paulo 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.

Media and Investor Relations Contacts:

 

Tony DeLise    William McBride
MarketAxess Holdings Inc.    Bryant Park Financial Communications
+1-212-813-6017    +1-917-239-6726

 

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Florencia Panizza

MarketAxess Holdings Inc.

+1-212-813-6029

 

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MarketAxess Holdings Inc.

Consolidated Statements of Operations

 

     Three Months Ended  
     March 31,  
     2014      2013  
     (In thousands, except per share data)  
     (unaudited)  

Revenues

     

Commissions

   $ 51,989       $ 47,186   

Information and post-trade services

     8,079         3,703   

Technology products and services

     2,036         1,233   

Investment income

     146         132   

Other

     1,148         1,397   
  

 

 

    

 

 

 

Total revenues

     63,398         53,651   
  

 

 

    

 

 

 

Expenses

     

Employee compensation and benefits

     18,609         15,016   

Depreciation and amortization

     4,121         2,286   

Technology and communications

     4,492         3,146   

Professional and consulting fees

     3,972         4,303   

Occupancy

     1,089         797   

Marketing and advertising

     1,209         935   

General and administrative

     2,198         2,497   
  

 

 

    

 

 

 

Total expenses

     35,690         28,980   
  

 

 

    

 

 

 

Income before taxes

     27,708         24,671   

Provision for income taxes

     10,233         9,126   
  

 

 

    

 

 

 

Net income from continuing operations

     17,475         15,545   

Loss from discontinued operations, net of income taxes

     —           (219
  

 

 

    

 

 

 

Net income

   $ 17,475       $ 15,326   
  

 

 

    

 

 

 

Per Share Data:

     

Basic earnings per common share

     

Income from continuing operations

   $ 0.47       $ 0.42   

Loss from discontinued operations

     —           —     
  

 

 

    

 

 

 

Net income per common share

   $ 0.47       $ 0.42   
  

 

 

    

 

 

 

Diluted earnings per common share

     

Income from continuing operations

   $ 0.46       $ 0.41   

Loss from discontinued operations

     —           —     
  

 

 

    

 

 

 

Net income per common share

   $ 0.46       $ 0.41   
  

 

 

    

 

 

 

Cash dividends declared per common share

   $ 0.16       $ 0.13   

Weighted-average common shares:

     

Basic

     37,121         36,774   

Diluted

     38,096         37,673   

 

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MarketAxess Holdings Inc.

Consolidated Condensed Balance Sheet Data

 

     March 31, 2014      December 31, 2013  
     (In thousands)  
     (unaudited)  

Assets

     

Cash and cash equivalents

   $ 130,045       $ 132,691   

Securities available-for-sale

     63,483         67,742   

Accounts receivable, net

     39,077         34,158   

All other assets

     113,768         116,987   
  

 

 

    

 

 

 

Total assets

   $ 346,373       $ 351,578   
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

     

Total liabilities

     28,112         41,216   

Total stockholders’ equity

     318,261         310,362   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 346,373       $ 351,578   
  

 

 

    

 

 

 

 

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MarketAxess Holdings Inc.

Reconciliation of Non-GAAP Financial Measures

 

     Three Months Ended  
     March 31,  
     2014      2013  
     (In thousands)  
     (unaudited)  
     EBITDA  

Net income from continuing operations

   $ 17,475       $ 15,545   

Add back:

     

Interest expense

     —           6   

Provision for income taxes

     10,233         9,126   

Depreciation and amortization

     4,121         2,286   
  

 

 

    

 

 

 

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations

   $ 31,829       $ 26,963   
  

 

 

    

 

 

 

 

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MarketAxess Holdings Inc.

Volume Statistics

 

     Three Months Ended  
     March 31,  
     2014      2013  
     Total Trading Volume  
     (In millions)  
     (unaudited)  

U.S. high grade - fixed-rate

   $ 113,128       $ 96,736   

U.S. high grade - floating-rate

     6,036         4,509   

Total U.S. high-grade

     119,164         101,245   

Other credit

     50,050         41,767   

Liquid products

     18,204         17,348   
  

 

 

    

 

 

 

Total

   $ 187,418       $ 160,360   
  

 

 

    

 

 

 
     Average Daily Volume  
     (In millions)  
     (unaudited)  

U.S. high-grade

   $ 1,954       $ 1,687   

Other credit

     815         692   

Liquid products

     298         289   
  

 

 

    

 

 

 

Total

   $ 3,067       $ 2,668   
  

 

 

    

 

 

 

Number of U.S. Trading Days 1

     61         60   

Number of U.K. Trading Days 2

     63         62   
     Average Variable Transaction Fee Per Million  
     (unaudited)  

U.S. high grade - fixed-rate

   $ 173       $ 198   

U.S. high grade - floating-rate

     60         21   

Total U.S. high-grade

     167         191   

Other credit

     301         296   

Liquid products

     45         46   

Total

     191         202   

 

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.

 

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