Last10K.com

Marketaxess Holdings Inc (MKTX) SEC Filing 10-Q Quarterly report for the period ending Monday, September 30, 2019

Marketaxess Holdings Inc

CIK: 1278021 Ticker: MKTX

Exhibit 99.1

LOGO

MARKETAXESS REPORTS THIRD QUARTER 2019 RECORD REVENUES

OF $131.6 MILLION, RECORD OPERATING INCOME OF $66.0 MILLION AND

RECORD DILUTED EPS OF $1.42

Third Quarter Financial Highlights*

 

   

Record revenues of $131.6 million, up 30%

 

   

Record operating income of $66.0 million, up 42%

 

   

Record diluted EPS of $1.42, up 39% from $1.02

 

   

Record trading volume of $528.7 billion, up 37%

 

   

Record Open TradingTM volume of $141.7 billion, up 61%

 

   

Record estimated U.S. high-grade market share of 20.2%

 

* 

All comparisons versus third quarter 2018.

NEW YORK, October 23, 2019 – 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, 2019.

“Broad-based growth in trading volumes across all major products and geographic regions drove record results in the third quarter as dealers and investors continue to embrace new solutions for credit trading automation,” said Rick McVey, Chairman and CEO of MarketAxess. “In addition to the acceleration of growth in current products, we are excited about new growth opportunities in U.S. Treasury trading, portfolio trading and Live Markets. Our investment in new technology solutions and products for our clients continues to grow while at the same time we produced operating margins in excess of 50% during the third quarter.”

Third Quarter Results

Total revenues for the third quarter of 2019 increased 29.7% to $131.6 million, compared to $101.4 million for the third quarter of 2018. Operating income was $66.0 million, compared to $46.4 million for the third quarter of 2018, an increase of 42.1%. Operating margin was 50.1%, compared to 45.8% for the third quarter of 2018. Net income totaled $54.0 million, or $1.42 per share on a diluted basis, compared to $38.6 million, or $1.02 per share, for the third quarter of 2018.

Commission revenue for the third quarter of 2019 increased 32.4% to $119.9 million, compared to $90.5 million for the third quarter of 2018. Variable transaction fees increased 45.5% to $96.0 million on total trading volume of $528.7 billion for the third quarter of 2019, compared to variable transaction fees of $66.0 million on total trading volume of $385.5 billion for the third quarter of 2018. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 20.2% for the third quarter of 2019, compared to an estimated 17.5% for the third quarter of 2018.

All other revenue, which consists of information services, post-trade services and other revenue, increased to $11.7 million, compared to $10.9 million for the third quarter of 2018. The increase in all other revenue was principally due to higher revenue from data sales and post-trade services, partially offset by the unfavorable impact of the stronger U.S. dollar of $0.5 million.

 

1


The following information was filed by Marketaxess Holdings Inc (MKTX) on Wednesday, October 23, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 

 

 

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 September 30, 2019  

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 October 21, 2019, the number of shares of the Registrant’s voting common stock outstanding was 37,777,078.

 

 

 


MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

TABLE OF CONTENTS

 

 

 

  

Page

 

PART I — Financial Information

  

 

Item 1.

Financial Statements (Unaudited)

  

3

 

Consolidated Statements of Financial Condition as of September 30, 2019 and December 31, 2018

  

3

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018

  

4

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018

  

5

 

Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2019 and 2018

  

6

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

  

8

 

Notes to Consolidated Financial Statements

  

9

Item 2.

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

  

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

  

38

Item 4.

Controls and Procedures

  

39

 

PART II — Other Information

  

 

Item 1.

Legal Proceedings

  

40

Item 1A.

Risk Factors

  

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

  

40

Item 3.

Defaults Upon Senior Securities

  

40

Item 4.

Mine Safety Disclosures

  

40

Item 5.

Other Information

  

41

Item 6.

Exhibits

  

41

 

 

 

 

 

 

 

 

 

 

 

2


PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

 

As of

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

(In thousands, except share

and per share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

320,527

 

 

$

246,322

 

Investments, at fair value

 

 

235,625

 

 

 

240,105

 

Accounts receivable, net of allowance of $146 and $80 as of

   September 30, 2019 and December 31, 2018, respectively

 

 

72,812

 

 

 

57,535

 

Goodwill and intangible assets, net of accumulated amortization

 

 

62,387

 

 

 

62,675

 

Furniture, equipment, leasehold improvements and capitalized

   software, net of accumulated depreciation and amortization

 

 

66,531

 

 

 

63,010

 

Operating lease right-of-use assets

 

 

75,390

 

 

 

 

Prepaid expenses and other assets

 

 

18,591

 

 

 

22,468

 

Deferred tax assets, net

 

 

3,163

 

 

 

3,424

 

Total assets

 

$

855,026

 

 

$

695,539

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Accrued employee compensation

 

$

35,082

 

 

$

39,053

 

Income and other tax liabilities

 

 

13,274

 

 

 

16,432

 

Deferred revenue

 

 

3,731

 

 

 

2,810

 

Accounts payable, accrued expenses and other liabilities

 

 

16,285

 

 

 

29,366

 

Operating lease liabilities

 

 

92,031

 

 

 

 

Total liabilities

 

 

160,403

 

 

 

87,661

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 4,855,000 shares authorized,

   no shares issued and outstanding as of September 30, 2019 and

   December 31, 2018

 

 

 

 

 

 

Series A Preferred Stock, $0.001 par value, 110,000 shares authorized,

   no shares issued and outstanding as of September 30, 2019 and

   December 31, 2018

 

 

 

 

 

 

Common stock voting, $0.003 par value, 110,000,000 shares

  authorized, 40,721,937 shares and 40,540,349 shares issued

  and 37,780,778 shares and 37,639,917 shares outstanding as of

  September 30, 2019 and December 31, 2018, respectively

 

 

122

 

 

 

122

 

Common stock non-voting, $0.003 par value, 10,000,000 shares

   authorized, no shares issued and outstanding as of

   September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Additional paid-in capital

 

 

343,543

 

 

 

341,860

 

Treasury stock - Common stock voting, at cost, 2,941,159 and

   2,900,432 shares as of September 30, 2019 and

   December 31, 2018, respectively

 

 

(196,402

)

 

 

(184,962

)

Retained earnings

 

 

560,164

 

 

 

463,252

 

Accumulated other comprehensive loss

 

 

(12,804

)

 

 

(12,394

)

Total stockholders' equity

 

 

694,623

 

 

 

607,878

 

Total liabilities and stockholders' equity

 

$

855,026

 

 

$

695,539

 

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

 

3


 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

(In thousands, except share

and per share amounts)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

$

119,869

 

 

$

90,513

 

 

$

346,753

 

 

$

289,398

 

Information services

 

7,693

 

 

 

7,174

 

 

 

22,215

 

 

 

21,170

 

Post-trade services

 

3,784

 

 

 

3,475

 

 

 

11,840

 

 

 

11,671

 

Other

 

251

 

 

 

281

 

 

 

770

 

 

 

882

 

Total revenues

 

131,597

 

 

 

101,443

 

 

 

381,578

 

 

 

323,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

32,681

 

 

 

26,282

 

 

 

97,962

 

 

 

81,315

 

Depreciation and amortization

 

6,700

 

 

 

6,173

 

 

 

19,127

 

 

 

17,232

 

Technology and communications

 

7,381

 

 

 

5,879

 

 

 

19,637

 

 

 

17,451

 

Professional and consulting fees

 

7,018

 

 

 

5,685

 

 

 

19,145

 

 

 

16,168

 

Occupancy

 

2,802

 

 

 

3,528

 

 

 

8,549

 

 

 

10,332

 

Marketing and advertising

 

2,506

 

 

 

2,980

 

 

 

8,472

 

 

 

8,580

 

Clearing costs

 

2,782

 

 

 

1,760

 

 

 

7,969

 

 

 

5,497

 

General and administrative

 

3,762

 

 

 

2,744

 

 

 

10,686

 

 

 

7,927

 

Total expenses

 

65,632

 

 

 

55,031

 

 

 

191,547

 

 

 

164,502

 

Operating income

 

65,965

 

 

 

46,412

 

 

 

190,031

 

 

 

158,619

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

2,211

 

 

 

1,635

 

 

 

6,296

 

 

 

4,186

 

Other, net

 

(838

)

 

 

(250

)

 

 

(860

)

 

 

(785

)

Total other income

 

1,373

 

 

 

1,385

 

 

 

5,436

 

 

 

3,401

 

Income before income taxes

 

67,338

 

 

 

47,797

 

 

 

195,467

 

 

 

162,020

 

Provision for income taxes

 

13,336

 

 

 

9,203

 

 

 

40,838

 

 

 

34,999

 

Net income

$

54,002

 

 

$

38,594

 

 

$

154,629

 

 

$

127,021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.46

 

 

$

1.04

 

 

$

4.17

 

 

$

3.44

 

Diluted

$

1.42

 

 

$

1.02

 

 

$

4.08

 

 

$

3.36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.51

 

 

$

0.42

 

 

$

1.53

 

 

$

1.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

37,066

 

 

 

36,951

 

 

 

37,053

 

 

 

36,952

 

Diluted

 

37,995

 

 

 

37,828

 

 

 

37,913

 

 

 

37,859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

(In thousands)

 

Net income

$

54,002

 

 

$

38,594

 

 

$

154,629

 

 

$

127,021

 

Net cumulative translation adjustment and foreign

   currency exchange hedge, net of tax of $1,012, $240, $1,281

   and $746, respectively

 

(1,416

)

 

 

(582

)

 

 

(1,398

)

 

 

(1,602

)

Net unrealized gain (loss) on securities available-for-sale,

   net of tax of $22, $23, $309 and $(66), respectively

 

70

 

 

 

72

 

 

 

988

 

 

 

(205

)

Comprehensive income

$

52,656

 

 

$

38,084

 

 

$

154,219

 

 

$

125,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

Balance at January 1, 2019

 

$

122

 

 

$

341,860

 

 

$

(184,962

)

 

$

463,252

 

 

$

(12,394

)

 

$

607,878

 

Net income

 

 

 

 

 

 

 

 

 

 

 

52,522

 

 

 

 

 

 

52,522

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,118

 

 

 

1,118

 

Unrealized net gain on securities available-for-sale,

    net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

459

 

 

 

459

 

Stock-based compensation

 

 

 

 

 

5,196

 

 

 

 

 

 

 

 

 

 

 

 

5,196

 

Exercise of stock options

 

 

 

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

172

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

(11,803

)

 

 

 

 

 

 

 

 

 

 

 

(11,803

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(5,184

)

 

 

 

 

 

 

 

 

(5,184

)

Cash dividend on common stock

 

 

 

 

 

 

 

 

 

 

 

(19,212

)

 

 

 

 

 

(19,212

)

Balance at March 31, 2019

 

 

122

 

 

 

335,425

 

 

 

(190,146

)

 

 

496,562

 

 

 

(10,817

)

 

 

631,146

 

Net income

 

 

 

 

 

 

 

 

 

 

 

48,105

 

 

 

 

 

 

48,105

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,100

)

 

 

(1,100

)

Unrealized net gain on securities available-for-sale,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

459

 

 

 

459

 

Stock-based compensation

 

 

 

 

 

5,929

 

 

 

 

 

 

 

 

 

 

 

 

5,929

 

Exercise of stock options

 

 

 

 

 

350

 

 

 

 

 

 

 

 

 

 

 

 

350

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

(258

)

 

 

 

 

 

 

 

 

 

 

 

(258

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(3,486

)

 

 

 

 

 

 

 

 

(3,486

)

Cash dividend on common stock

 

 

 

 

 

 

 

 

 

 

 

(19,237

)

 

 

 

 

 

(19,237

)

Balance at June 30, 2019

 

 

122

 

 

 

341,446

 

 

 

(193,632

)

 

 

525,430

 

 

 

(11,458

)

 

 

661,908

 

Net income

 

 

 

 

 

 

 

 

 

 

 

54,002

 

 

 

 

 

 

54,002

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,416

)

 

 

(1,416

)

Unrealized net gain on securities available-for-sale,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

70

 

 

 

70

 

Stock-based compensation

 

 

 

 

 

7,944

 

 

 

 

 

 

 

 

 

 

 

 

7,944

 

Exercise of stock options

 

 

 

 

 

363

 

 

 

 

 

 

 

 

 

 

 

 

363

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

(6,210

)

 

 

 

 

 

 

 

 

 

 

 

(6,210

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(2,770

)

 

 

 

 

 

 

 

 

(2,770

)

Cash dividend on common stock

 

 

 

 

 

 

 

 

 

 

 

(19,268

)

 

 

 

 

 

(19,268

)

Balance at September 30, 2019

 

$

122

 

 

$

343,543

 

 

$

(196,402

)

 

$

560,164

 

 

$

(12,804

)

 

$

694,623

 

 

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


 

6


 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

(Unaudited)

 

 

 

Common

Stock

Voting

 

 

Additional

Paid-In

Capital

 

 

Treasury Stock -

Common

Stock

Voting

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Total

Stockholders'

Equity

 

 

 

(In thousands)

 

Balance at January 1, 2018

 

$

121

 

 

$

331,081

 

 

$

(159,791

)

 

$

353,583

 

 

$

(10,226

)

 

$

514,768

 

Net income

 

 

 

 

 

 

 

 

 

 

 

47,940

 

 

 

 

 

 

47,940

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

268

 

 

 

268

 

Unrealized net loss on securities available-for-sale,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(334

)

 

 

(334

)

Stock-based compensation

 

 

 

 

 

3,951

 

 

 

 

 

 

 

 

 

 

 

 

3,951

 

Exercise of stock options

 

 

 

 

 

258

 

 

 

 

 

 

 

 

 

 

 

 

258

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

(7,621

)

 

 

 

 

 

 

 

 

 

 

 

(7,621

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(6,268

)

 

 

 

 

 

 

 

 

(6,268

)

Cash dividend on common stock

 

 

 

 

 

 

 

 

 

 

 

(15,798

)

 

 

 

 

 

(15,798

)

Balance at March 31, 2018

 

 

121

 

 

 

327,669

 

 

 

(166,059

)

 

 

385,725

 

 

 

(10,292

)

 

 

537,164

 

Net income

 

 

 

 

 

 

 

 

 

 

 

40,487

 

 

 

 

 

 

40,487

 

Cumulative translation adjustment and foreign

   currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,288

)

 

 

(1,288

)

Unrealized net gain on securities available-for-sale,

   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57

 

 

 

57

 

Stock-based compensation

 

 

 

 

 

3,650

 

 

 

 

 

 

 

 

 

 

 

 

3,650

 

Exercise of stock options

 

 

 

 

 

113

 

 

 

 

 

 

 

 

 

 

 

 

113

 

Withholding tax payments on restricted stock

   vesting and stock option exercises

 

 

 

 

 

(376

)

 

 

 

 

 

 

 

 

 

 

 

(376

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(6,636

)

 

 

 

 

 

 

 

 

(6,636

)

Cash dividend on common stock

 

 

 

 

 

 

 

 

 

 

 

(15,793

)