Marketaxess Holdings Inc (MKTX) SEC Filing 8-K Material Event for the period ending Wednesday, October 24, 2018

Marketaxess Holdings Inc

CIK: 1278021 Ticker: MKTX

Exhibit 99.1






Third Quarter Financial Highlights*



Revenues of $101.4 million, up 6.1%



Expenses of $55.0 million, including $1.9 million of duplicate occupancy expense



Diluted EPS of $1.02, up 13.3%



Trading volume of $385.5 billion, up 11.2%



Open Trading™ volume of $88.3 billion, up 58.3%

*All comparisons versus third quarter 2017.

NEW YORK, October 24, 2018 – 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 ended September 30, 2018.

“Strong market share gains across our core products and increased Open Trading activity led to a solid increase in trading volume in the third quarter in spite of quiet credit trading conditions,” said Rick McVey, Chairman and CEO of MarketAxess. “Product diversification is evident in the results with a record 9.2% estimated high-yield market share, 22% year-on-year increase in emerging market trading volume and a 28% increase in Eurobond volumes. We are encouraged by the improvement in market conditions for credit trading that we started to see in September.”

Third Quarter Results

Total revenues for the third quarter of 2018 increased 6.1% to $101.4 million, compared to $95.6 million for the third quarter of 2017. Operating income was $46.4 million, compared to $46.6 million for the third quarter of 2017, a decrease of 0.5%. Operating margin was 45.8%, compared to 48.8% for the third quarter of 2017. Net income totaled $38.6 million, or $1.02 per share on a diluted basis, compared to $34.1 million, or $0.90 per share, for the third quarter of 2017.

Commission revenue for the third quarter of 2018 increased 4.9% to $90.5 million, compared to $86.3 million for the third quarter of 2017. Variable transaction fees were $66.0 million on total trading volume of $385.5 billion for the third quarter of 2018, compared to variable transaction fees of $65.9 million on total trading volume of $346.8 billion for the third quarter of 2017. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 17.5% for the third quarter of 2018, compared to an estimated 17.2% for the third quarter of 2017.

All other revenue increased 17.4% to $10.9 million, compared to $9.3 million for the third quarter of 2017, principally due to higher information services revenue of $0.8 million and post-trade services revenue of $0.8 million.

Total expenses for the third quarter of 2018 increased 12.4% to $55.0 million, compared to $48.9 million for the third quarter of 2017. The increase in total expenses was largely due to higher occupancy costs of $1.7 million, depreciation and amortization of $1.6 million, marketing and advertising expenses of $0.9



million, technology and communication costs of $0.8 million and employee compensation and benefit costs of $0.8 million, mainly due to an increase in headcount. Occupancy costs in the third quarter of 2018 include duplicate expense recognized during the build-out phase of the Company’s new corporate offices in New York. The duplicate expense had the effect of increasing total expenses by $1.9 million and reducing diluted EPS by $0.04.

Other income increased to $1.4 million in the third quarter of 2018 from $0.6 million in the third quarter of 2017 due to a $0.7 million increase in investment income as a result of higher investment balances and an increase in interest rates.

The effective tax rate for the third quarter of 2018 was 19.3%, compared to 27.7% for the third quarter of 2017. The third quarter of 2018 income tax provision reflected $1.7 million of excess tax benefits related to share-based compensation awards and a $0.4 million reduction to the provisional tax charge recorded in 2017 in connection with the Tax Cuts and Jobs Act. The third quarter of 2017 income tax provision included $3.8 million of excess tax benefits related to share-based compensation awards.


The Company’s board of directors declared a cash dividend of $0.42 per share of common stock outstanding, to be paid on November 21, 2018 to stockholders of record as of the close of business on November 7, 2018.

Share Repurchases

A total of 31,500 shares were repurchased in the third quarter of 2018 at a cost of $6.1 million.

Balance Sheet Data

As of September 30, 2018, total assets were $646.1 million and included $446.2 million in cash, cash equivalents and investments. Total stockholders’ equity as of September 30, 2018 was $578.6 million.

Guidance for 2018

The Company is updating its full year 2018 overall effective tax rate guidance to a range of 21.0% to 22.0%, down from the previous guidance of 23.0% to 25.0%. The reduction is primarily due to excess tax benefits related to share-based compensation awards that were exercised during 2018.

The Company expects that full year 2018 expenses will be near the low-end of the $220.0 million to $232.0 million guidance range. The expense guidance includes duplicate occupancy costs of approximately $7.0 million for the Company’s new corporate offices in New York during the build-out phase.

The Company also expects that full year 2018 capital expenditures will be near the high-end of the $43.0 million to $50.0 million guidance range. The capital expenditure guidance includes approximately $26.0 million of buildout costs for the new corporate offices.

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

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, October 24, 2018, 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 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 passcode for replay callers is 3998335. The Webcast will also be archived on 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 1,400 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, municipal bonds, credit default swaps and other fixed-income securities. 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

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



Media and Investor Relations Contacts:


Tony DeLise

MarketAxess Holdings Inc.



William McBride



Mary Sedarat

MarketAxess Holdings Inc.





MarketAxess Holdings Inc.

Consolidated Statements of Operations


     Three Months Ended
September 30,
    Nine Months Ended
September 30,
     2018     2017     2018     2017  
     (In thousands, except per share data)  




   $ 90,513     $ 86,270     $ 289,398     $ 267,307  

Information services

     7,174       6,331       21,170       19,013  

Post-trade services

     3,475       2,678       11,671       7,623  


     281       305       882       919  













Total revenues

     101,443       95,584       323,121       294,862  















Employee compensation and benefits

     26,282       25,485       81,315       78,088  

Depreciation and amortization

     6,173       4,583       17,232       14,066  

Technology and communications

     5,879       5,035       17,451       14,442  

Professional and consulting fees

     5,685       5,547       16,168       13,912  


     3,528       1,795       10,332       4,621  

Marketing and advertising

     2,980       2,089       8,580       6,757  

Clearing costs

     1,760       1,476       5,497       4,320  

General and administrative

     2,744       2,939       7,927       7,878  













Total expenses

     55,031       48,949       164,502       144,084  













Operating income

     46,412       46,635       158,619       150,778  

Other income (expense)


Investment income

     1,635       964       4,186       2,551  

Other, net

     (250     (382     (785     (932













Total other income

     1,385       582       3,401       1,619  













Income before income taxes

     47,797       47,217       162,020       152,397  

Provision for income taxes

     9,203       13,087       34,999       37,781  













Net income

   $ 38,594     $ 34,130     $ 127,021     $ 114,616  













Per Share Data:


Net income per common share



   $ 1.04     $ 0.93     $ 3.44     $ 3.11  


   $ 1.02     $ 0.90     $ 3.36     $ 3.01  

Cash dividends declared per common share

   $ 0.42     $ 0.33     $ 1.26     $ 0.99  

Weighted-average common shares:



     36,951       36,865       36,952       36,856  


     37,828       38,019       37,859       38,069  



MarketAxess Holdings Inc.

Commission Revenue Details


     Three Months Ended
September 30,
     Nine Months Ended
September 30,
     2018      2017      2018      2017  
     Total Commissions Revenue  
     (In thousands)  

Transaction Fees


U.S. high-grade

   $ 32,385      $ 34,020      $ 107,553      $ 102,411  

Other credit1

     33,088        31,381        108,280        110,221  

Liquid products2

     482        546        1,553        1,746  













Total transaction fees

     65,955        65,947        217,386        214,378  













Distribution Fees


U.S. high-grade

     18,032        16,305        53,520        47,985  

Other credit1

     6,385        3,842        17,967        4,506  

Liquid products2,3

     141        176        525        438  













Total distribution fees

     24,558        20,323        72,012        52,929  













Total commissions

   $ 90,513      $ 86,270      $ 289,398      $ 267,307  












     Average Variable Transaction Fee Per Million  

U.S. high-grade—fixed-rate

   $ 162      $ 174      $ 161      $ 168  

U.S. high-grade—floating-rate

     91        67        94        62  

Total U.S. high-grade

     157        169        156        164  

Other credit

     198        235        199        252  

Liquid products

     39        45        40        43  


     171        190        171        194  



Other credit includes high-yield, emerging markets, Eurobonds and municipal bonds.


Liquid products includes U.S. agencies and European government bonds.


Includes CDS SEF-related revenue.



MarketAxess Holdings Inc.

Consolidated Condensed Balance Sheet Data


     As of  
     September 30,
     December 31,
     (In thousands)  



Cash and cash equivalents

   $ 210,085      $ 167,014  

Investments, at fair value

     236,101        239,521  

Accounts receivable, net

     62,004        52,636  

All other assets

     137,941        122,061  







Total assets

   $ 646,131      $ 581,232  







Liabilities and stockholders’ equity


Total liabilities

   $ 67,513      $ 66,464  

Total stockholders’ equity

     578,618        514,768  







Total liabilities and stockholders’ equity

   $ 646,131      $ 581,232  









MarketAxess Holdings Inc.

Reconciliation of Non-GAAP Financial Measures


     Three Months Ended
September 30,
    Nine Months Ended
September 30,
     2018     2017     2018     2017  
     Earnings Before Interest, Taxes, Depreciation
and Amortization
     (In thousands)  

Net income

   $ 38,594     $ 34,130     $ 127,021     $ 114,616  

Add back:


Interest expense

     —         —         —         —    

Provision for income taxes

     9,203       13,087       34,999       37,781  

Depreciation and amortization

     6,173       4,583       17,232       14,066  













Earnings before interest, taxes, depreciation and amortization

   $ 53,970     $ 51,800     $ 179,252     $ 166,463  












     Free Cash Flow  
     (In thousands)  

Cash flow from operating activities

   $ 67,994     $ 52,465     $ 153,812     $ 121,583  



Net (sales) of corporate debt trading investments

     (9,959     (8,449     (6,671     (8,338

Purchases of furniture, equipment and leasehold improvements

     (7,786     (1,468     (23,821     (7,245

Capitalization of software development costs

     (2,635     (3,427     (9,171     (10,094













Free cash flow

   $ 47,614     $ 39,121     $ 114,149     $ 95,906  















MarketAxess Holdings Inc.

Volume Statistics*


     Three Months Ended
September 30,
     Nine Months Ended
September 30,
     2018      2017      2018      2017  
     Total Trading Volume  
     (In millions)  

U.S. high-grade—fixed-rate

   $ 191,950      $ 192,092      $ 643,781      $ 599,783  

U.S. high-grade—floating-rate

     14,066        8,734        43,739        24,024  













Total U.S. high-grade

     206,016        200,826        687,520        623,807  

Other credit

     166,990        133,757        544,614        438,055  

Liquid products

     12,505        12,189        39,134        40,840  














   $ 385,511      $ 346,772      $ 1,271,268      $ 1,102,702  












     Average Daily Volume  
     (In millions)  

U.S. high-grade

   $ 3,270      $ 3,188      $ 3,657      $ 3,318  

Other credit

     2,641        2,116        2,893        2,327  

Liquid products

     198        193        208        217  














   $ 6,109      $ 5,497      $ 6,758      $ 5,862  













Number of U.S. Trading Days1

     63        63        188        188  

Number of U.K. Trading Days2

     64        64        189        189  



The number of U.S. trading days is based on the SIFMA holiday recommendation calendar.


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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Marketaxess Holdings Inc provided additional information to their SEC Filing as exhibits

Ticker: MKTX
CIK: 1278021
Form Type: 8-K Corporate News
Accession Number: 0001193125-18-305878
Submitted to the SEC: Wed Oct 24 2018 7:01:00 AM EST
Accepted by the SEC: Wed Oct 24 2018
Period: Wednesday, October 24, 2018
Industry: Security Brokers Dealers And Flotation Companies
  1. Earnings Release
  2. Financial Exhibit
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