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Exhibit 99.1

 

LOGO

MARKETAXESS REPORTS FOURTH QUARTER 2018 REVENUES

OF $112.4 MILLION, PRE-TAX INCOME OF $56.1 MILLION AND

DILUTED EPS OF $1.21

Company Announces 21% Increase in Regular Quarterly Dividend to $0.51 per Share,

up from $0.42

Fourth Quarter Financial Highlights*

 

   

Revenues of $112.4 million, up 14.1%

 

   

Diluted EPS of $1.21, up 37.5%

 

   

Trading volume of $442.3 billion, up 24.4%

 

   

Record Open Trading™ volume of $117.5 billion, up 96.5%

 

   

Record estimated U.S. high-grade market share of 19.3%, up from 17.6%, and U.S. high-yield market share of 10.9%, up from 6.3%

 

* 

All comparisons versus fourth quarter 2017.

Full Year 2018 Financial Highlights**

 

   

Record revenues of $435.6 million, up 10.7%

 

   

Record diluted EPS of $4.57, up 17.5%

 

   

Record total trading volume of $1.7 trillion, up 17.5%

 

   

Record Open Trading™ volume of $376.5 billion, up 62.6%

 

   

Record estimated U.S. high-grade market share of 18.1%, up from 16.9%

 

** 

All comparisons versus full year 2017.

NEW YORK, January 30, 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 December 31, 2018.

“The fourth quarter was one of our best quarters ever for year over year market share gains, as well as volume growth in Open Trading™.” said Rick McVey, Chairman and CEO of MarketAxess. “The liquidity pool provided by Open Trading was increasingly valuable as credit spreads widened, leading to record estimated transaction cost savings for our clients of $57 million for the quarter. I am very happy to welcome Chris Concannon to MarketAxess as our President and COO to kick off the new year.”

Fourth Quarter Results

Total revenues for the fourth quarter of 2018 increased 14.1% to $112.4 million, compared to $98.6 million for the fourth quarter of 2017. Operating income was $54.0 million, compared to $48.8 million for the fourth quarter of 2017, an increase of 10.5%. Operating margin was 48.0%, compared to 49.6% for the fourth quarter of 2017. Net income totaled $45.8 million, or $1.21 per share on a diluted basis, compared to $33.5 million, or $0.88 per share, for the fourth quarter of 2017.

 

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Commission revenue for the fourth quarter of 2018 increased 15.3% to $101.4 million, compared to $88.0 million for the fourth quarter of 2017. Variable transaction fees increased 17.0% to $76.6 million on total trading volume of $442.3 billion for the fourth quarter of 2018, compared to variable transaction fees of $65.4 million on total trading volume of $355.6 billion for the fourth quarter of 2017. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 19.3% for the fourth quarter of 2018, compared to an estimated 17.6% for the fourth quarter of 2017.

All other revenue increased 4.0% to $11.0 million, compared to $10.6 million for the fourth quarter of 2017, principally due to higher information services revenue of $0.3 million and post-trade services revenue of $0.2 million.

Total expenses for the fourth quarter of 2018 increased 17.6% to $58.5 million, compared to $49.7 million for the fourth quarter of 2017. The increase in total expenses was largely due to higher employee compensation and benefit costs of $3.6 million, occupancy costs of $2.3 million, technology and communication costs of $0.8 million, clearing costs of $0.8 million and depreciation and amortization of $0.6 million. Occupancy costs in the fourth 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 $2.1 million and reducing diluted EPS by $0.05.

Other income increased to $2.1 million in the fourth quarter of 2018 from $0.5 million in the fourth quarter of 2017 due to a $0.9 million increase in investment income as a result of higher investment balances and an increase in interest rates.

The effective tax rate for the fourth quarter of 2018 was 18.3%, compared to 32.2% for the fourth quarter of 2017. The fourth quarter of 2018 income tax provision reflected $1.9 million of excess tax benefits related to share-based compensation awards. The fourth quarter of 2017 income tax provision includes a one-time tax charge totaling $11.7 million related to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law in December 2017, offset by excess tax benefits of $11.4 million related to a new share-based compensation accounting standard (ASU 2016-09) adopted as of January 1, 2017.

Full Year 2018 Results

Total revenues for the year ended December 31, 2018 increased 10.7% to a record $435.6 million, compared to $393.4 million for 2017. Operating income was a record $212.6 million, compared to $199.6 million for 2017, an increase of 6.5%. Operating margin was 48.8%, compared to 50.7% for 2017. Net income totaled $172.9 million, or $4.57 per share on a diluted basis, compared to $148.1 million, or $3.89 per share, for 2017.

Commission revenue for the year ended December 31, 2018 increased 10.0% to a record $390.8 million, compared to $355.3 million for 2017. Variable transaction fees increased 5.1% to $293.9 million on total trading volume of $1.7 trillion, compared to variable transaction fees of $279.8 million on total trading volume of $1.5 trillion for 2017. U.S. high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 18.1%, compared to an estimated 16.9% for 2017.

All other revenue increased 17.3% to $44.7 million in 2018, compared to $38.1 million for 2017. The increase in all other revenue was principally due to higher post-trade services revenue of $4.3 million and information services revenue of $2.4 million.

Total expenses for the year ended December 31, 2018 increased 15.1% to $223.0 million, compared to $193.8 million for 2017. The increase in total expenses was principally due to higher occupancy costs of $8.1 million, employee compensation and benefits costs of $6.8 million, depreciation and amortization of $3.8 million, technology and communication costs of $3.8 million and marketing and advertising costs of $2.4 million. Occupancy costs in 2018 included 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 $7.3 million and reducing diluted EPS by $0.15.

The effective tax rate for 2018 was 20.7%, compared to 26.6% for 2017. The 2018 income tax provision reflected $5.6 million of excess tax benefits related to share-based compensation awards. The 2017 income tax provision included $26.1 million of excess tax benefits related to share-based compensation awards offset by the one-time tax charge of $11.7 million related to the enactment of the Tax Act.

 

2


Dividend

The Company’s board of directors declared a 21% increase in the quarterly cash dividend to $0.51 per share of common stock outstanding, to be paid on February 27, 2019 to stockholders of record as of the close of business on February 13, 2019.

Share Repurchases

A total of 30,106 shares were repurchased in the fourth quarter of 2018 at a cost of $6.2 million. In January 2019, the Board of Directors authorized a new two-year share repurchase program for up to $100 million.    The Company expects the plan to commence in April 2019 following the expiration of the current plan.

Balance Sheet Data

As of December 31, 2018, total assets were $695.5 million and included $486.4 million in cash, cash equivalents and investments. Total stockholders’ equity as of December 31, 2018 was $607.9 million.

Guidance for 2019

For 2019, the Company is providing the following guidance:

 

   

Expenses are expected to be in the range of $244.0 million to $256.0 million.

 

   

Capital expenditures are expected to be in the range of $25.0 million to $30.0 million.

 

   

The Company’s overall effective tax rate is expected to be between 20.5% to 22.5%, including the estimated impact of 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 and useful for period-to-period comparison results. See the attached schedule at the end of this release for a reconciliation of GAAP to non-GAAP financial measures.

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, January 30, 2019, 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 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) for one week after the announcement. The passcode for replay callers is 4467811. 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 1,500 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 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.

 

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Media and Investor Relations Contacts:

 

Tony DeLise

   William McBride

MarketAxess Holdings Inc.

   RF|Binder

+1-212-813-6017

   +1-917-239-6726

Mary Sedarat

MarketAxess Holdings Inc.

+1-212-813-6226

 

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MarketAxess Holdings Inc.

Consolidated Statements of Operations    

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2018      2017     2018     2017  
     (In thousands, except per share data)  
     (unaudited)  

Revenues

         

Commissions

   $ 101,436      $ 87,975     $ 390,834     $ 355,282  

Information services

     7,057        6,793       28,227       25,806  

Post-trade services

     3,675        3,467       15,346       11,090  

Other

     276        325       1,158       1,244  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     112,444        98,560       435,565       393,422  
  

 

 

    

 

 

   

 

 

   

 

 

 

Expenses

         

Employee compensation and benefits

     27,802        24,225       109,117       102,313  

Depreciation and amortization

     5,848        5,208       23,080       19,274  

Technology and communications

     6,415        5,606       23,866       20,048  

Professional and consulting fees

     5,353        5,455       21,521       19,367  

Occupancy

     3,844        1,504       14,176       6,125  

Marketing and advertising

     3,534        3,005       12,114       9,762  

Clearing costs

     2,257        1,477       7,754       5,797  

General and administrative

     3,426        3,243       11,353       11,121  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total expenses

     58,479        49,723       222,981       193,807  
  

 

 

    

 

 

   

 

 

   

 

 

 

Operating income

     53,965        48,837       212,584       199,615  

Other income (expense)

         

Investment income

     1,926        1,068       6,112       3,619  

Other, net

     175        (534     (610     (1,466
  

 

 

    

 

 

   

 

 

   

 

 

 

Total other income

     2,101        534       5,502       2,153  
  

 

 

    

 

 

   

 

 

   

 

 

 

Income before income taxes

     56,066        49,371       218,086       201,768  

Provision for income taxes

     10,235        15,898       45,234       53,679  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

   $ 45,831      $ 33,473     $ 172,852     $ 148,089  
  

 

 

    

 

 

   

 

 

   

 

 

 

Per Share Data:

         

Net income per common share

         

Basic

   $ 1.24      $ 0.91     $ 4.68     $ 4.02  

Diluted

   $ 1.21      $ 0.88     $ 4.57     $ 3.89  

Cash dividends declared per common share

   $ 0.42      $ 0.33     $ 1.68     $ 1.32  

Weighted-average common shares:

         

Basic

     36,978        36,887       36,958       36,864  

Diluted

     37,845        37,943       37,855       38,038  

 

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MarketAxess Holdings Inc.

Commission Revenue Details    

 

     Three Months Ended
December 31,
     Twelve Months Ended
December 31,
 
     2018      2017      2018      2017  
     Total Commissions Revenue  
     (In thousands)  
     (unaudited)  

Transaction Fees

           

U.S. high-grade

   $ 37,089      $ 34,623      $ 144,642      $ 137,034  

Other credit1

     38,868        30,271        147,148        140,492  

Liquid products2

     593        531        2,146        2,277  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total transaction fees

     76,550        65,425        293,936        279,803  
  

 

 

    

 

 

    

 

 

    

 

 

 

Distribution Fees

           

U.S. high-grade

     18,615        16,724        72,135        64,709  

Other credit1

     6,110        5,648        24,077        10,154  

Liquid products2,3

     161        178        686        616  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total distribution fees

     24,886        22,550        96,898        75,479  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commissions

   $ 101,436      $ 87,975      $ 390,834      $ 355,282  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Average Variable Transaction Fee Per Million  
     (unaudited)  

U.S. high-grade—fixed-rate

   $ 161      $ 177      $ 161      $ 170  

U.S. high-grade—floating-rate

     70        73        87        65  

Total U.S. high-grade

     154        172        156        166  

Other credit

     208        213        201        242  

Liquid products

     41        42        40        43  

Total

     173        184        172        192  

 

1 

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

2 

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

 

7


MarketAxess Holdings Inc.

Consolidated Condensed Balance Sheet Data

 

     As of  
     December 31, 2018      December 31, 2017  
     (In thousands)  
     (unaudited)  

Assets

     

Cash and cash equivalents

   $ 246,322      $ 167,014  

Investments, at fair value

     240,105        239,521  

Accounts receivable, net

     57,535        52,636  

All other assets

     151,577        122,061  
  

 

 

    

 

 

 

Total assets

   $ 695,539      $ 581,232  
  

 

 

    

 

 

 

Liabilities and stockholders’ equity

     

Total liabilities

   $ 87,661      $ 66,464  

Total stockholders’ equity

     607,878        514,768  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 695,539      $ 581,232  
  

 

 

    

 

 

 

 

8


MarketAxess Holdings Inc.

Reconciliation of Non-GAAP Financial Measures

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
           2018                 2017                 2018                 2017        
     Earnings Before Interest, Taxes, Depreciation and Amortization  
     (In thousands)  
     (unaudited)  

Net income

   $ 45,831     $ 33,473     $ 172,852     $ 148,089  

Add back:

        

Interest expense

     —         —         —         —    

Provision for income taxes

     10,235       15,898       45,234       53,679  

Depreciation and amortization

     5,848       5,208       23,080       19,274  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before interest, taxes, depreciation and amortization

   $ 61,914     $ 54,579     $ 241,166     $ 221,042  
  

 

 

   

 

 

   

 

 

   

 

 

 
     Free Cash Flow  
     (In thousands)  
     (unaudited)  

Cash flow from operating activities

   $ 70,105     $ 46,452     $ 223,917     $ 168,035  

Less:

        

Net purchases (sales) of corporate debt trading investments

     5,815       25,419       (856     17,081  

Purchases of furniture, equipment and leasehold improvements

     (11,847     (4,841     (35,668     (12,086

Capitalization of software development costs

     (2,754     (3,377     (11,925     (13,471
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 61,319     $ 63,653     $ 175,468     $ 159,559  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

9


MarketAxess Holdings Inc.

Volume Statistics*

 

     Three Months Ended December 31,      Twelve Months Ended December 31,  
           2018                  2017                  2018                  2017        
     Total Trading Volume  
     (In millions)  
     (unaudited)  

U.S. high-grade—fixed-rate

   $ 223,737      $ 191,411      $ 867,518      $ 791,194  

U.S. high-grade—floating-rate

     16,915        9,815        60,654        33,839  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. high-grade

     240,652        201,226        928,172        825,033  

Other credit

     187,274        141,857        731,888        579,912  

Liquid products

     14,345        12,543        53,479        53,383  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 442,271      $ 355,626      $ 1,713,539      $ 1,458,328  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Average Daily Volume  
     (In millions)  
     (unaudited)  

U.S. high-grade

   $ 3,945      $ 3,246      $ 3,728      $ 3,300  

Other credit

     3,037        2,281        2,929        2,316  

Liquid products

     234        202        214        213  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,216      $ 5,729      $ 6,871      $ 5,829  
  

 

 

    

 

 

    

 

 

    

 

 

 

Number of U.S. Trading Days 1

     61        62        249        250  

Number of U.K. Trading Days 2

     64        63        253        252  

 

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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