MarketAxess Reports Q3 Earnings: Lower Income, Record Volume

by Damian Chmiel
  • Operating income declined to $66.9 million, impacted by a rise of 10% in total expenses.
  • However, the company achieved a record automated trading volume and active clients base.
Richard McVey, the Founder and Executive Chairman of MarketAxess. Source: YouTube
Richard McVey, the Founder and Executive Chairman of MarketAxess. Source: YouTube
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MarketAxess Holdings Inc., an electronic trading platform for fixed-income securities, has released its financial results for the third quarter of 2023. The report shows a stable revenue of $172.3 million, identical to the previous year. However, an uptick of 10% in total expenses, primarily due to strategic investments, led to a lower operating income of $66.9 million.

MarketAxess Reports Higher Revenue but Lower Net Income

The company's total revenue for the quarter remained unchanged at $172.3 million, reflecting the impact of low credit spread volatility . Operating income saw a decline, standing at $66.9 million, mainly due to a boost of 10% in total expenses. These expenses were primarily incurred to tap into long-term revenue opportunities in the global fixed-income markets.

Despite the increased expenses, MarketAxess maintains a robust financial position with $553.3 million in cash, cash equivalents, and investments. The company has also declared a quarterly cash dividend of $0.72 per share.

MarketAxess reported a diluted EPS of $1.46, with a net income of $54.9 million. Compared to last year's quarter, this represents a decrease of 4% in both metrics.

Table: 3Q 2023 select financial results

$ in millions, except per share data
(unaudited)

Revenues

Operating Income

Net Income

Diluted EPS

Net Income
Margin (%)

EBITDA3

EBITDA Margin
(%)
3

3Q23

$172

$67

$55

$1.46

31.9%

$83

48.1%

3Q22

$172

$76

$59

$1.58

34.5%

$93

54.0%

% Change

-

(12%)

(7%)

(8%)

(260) bps

(11%)

(590) bps

YTD 2023

$555

$238

$188

$5.01

33.9%

$284

51.2%

YTD 2022

$540

$249

$191

$5.07

35.3%

$303

56.2%

% Change

3%

(4%)

(2%)

(1%)

(140) bps

(6%)

(500) bps

One of the bright spots in the report was the record information services revenue of $11.8 million, marking an improvement of 21.5%. This growth is attributed to the increasing adoption of the Composite+ data analytics tool.

Diversification and Trading Volume

The company exhibited strong geographic and product diversification. Average daily volume (ADV) from international products, including emerging markets and Eurobonds, increased by 11.3%. Municipal bonds also saw a rise of 7.4% in ADV. Automated trading volume and trade count broke previous records, surpassing full-year 2022 levels.

Table: 3Q 2023 trading volume

CREDIT

RATES

$ in millions
(unaudited)

US/UK Trading
Days
4

Total
ADV

Total
Credit

High-Grade

High-Yield

Emerging
Markets

Eurobonds

Municipal
Bonds

Total
Rates

US Govt.
Bonds

Agcy./Other
Govt. Bonds

3Q23

63/64

$29,285

$11,156

$5,179

$1,294

$2,799

$1,484

$388

$18,129

$17,713

$416

3Q22

64/64

$31,440

$10,974

$5,124

$1,626

$2,592

$1,255

$361

$20,466

$20,133

$333

% Change

(7%)

2%

1%

(20%)

8%

18%

7%

(11%)

(12%)

25%

The number of active client firms reached a record 2,093, a positive lift of 6.1%. This includes the highest number of active US credit client firms and international active client firms, indicating a broadening customer base.

Future Outlook

The company has refined its full-year 2023 expense guidance, now ranging from $432.0 million to $438.0 million, including an estimated $12.5 million of M&A-related expenses. The effective tax rate for the full year is expected to be approximately 23.5%, lower than the previously stated range.

Therefore, while MarketAxess faces challenges due to low credit spread volatility and increased expenses, its diversified product offerings and strong client engagement provide a positive outlook for the future.

Recently, MarketAxxes cooperated with Bloomberg and Tradeweb to form a joint venture and establish an independent company with the goal of becoming the consolidated tape provider (CTP) for fixed-income instruments in the European Union.

MarketAxess Holdings Inc., an electronic trading platform for fixed-income securities, has released its financial results for the third quarter of 2023. The report shows a stable revenue of $172.3 million, identical to the previous year. However, an uptick of 10% in total expenses, primarily due to strategic investments, led to a lower operating income of $66.9 million.

MarketAxess Reports Higher Revenue but Lower Net Income

The company's total revenue for the quarter remained unchanged at $172.3 million, reflecting the impact of low credit spread volatility . Operating income saw a decline, standing at $66.9 million, mainly due to a boost of 10% in total expenses. These expenses were primarily incurred to tap into long-term revenue opportunities in the global fixed-income markets.

Despite the increased expenses, MarketAxess maintains a robust financial position with $553.3 million in cash, cash equivalents, and investments. The company has also declared a quarterly cash dividend of $0.72 per share.

MarketAxess reported a diluted EPS of $1.46, with a net income of $54.9 million. Compared to last year's quarter, this represents a decrease of 4% in both metrics.

Table: 3Q 2023 select financial results

$ in millions, except per share data
(unaudited)

Revenues

Operating Income

Net Income

Diluted EPS

Net Income
Margin (%)

EBITDA3

EBITDA Margin
(%)
3

3Q23

$172

$67

$55

$1.46

31.9%

$83

48.1%

3Q22

$172

$76

$59

$1.58

34.5%

$93

54.0%

% Change

-

(12%)

(7%)

(8%)

(260) bps

(11%)

(590) bps

YTD 2023

$555

$238

$188

$5.01

33.9%

$284

51.2%

YTD 2022

$540

$249

$191

$5.07

35.3%

$303

56.2%

% Change

3%

(4%)

(2%)

(1%)

(140) bps

(6%)

(500) bps

One of the bright spots in the report was the record information services revenue of $11.8 million, marking an improvement of 21.5%. This growth is attributed to the increasing adoption of the Composite+ data analytics tool.

Diversification and Trading Volume

The company exhibited strong geographic and product diversification. Average daily volume (ADV) from international products, including emerging markets and Eurobonds, increased by 11.3%. Municipal bonds also saw a rise of 7.4% in ADV. Automated trading volume and trade count broke previous records, surpassing full-year 2022 levels.

Table: 3Q 2023 trading volume

CREDIT

RATES

$ in millions
(unaudited)

US/UK Trading
Days
4

Total
ADV

Total
Credit

High-Grade

High-Yield

Emerging
Markets

Eurobonds

Municipal
Bonds

Total
Rates

US Govt.
Bonds

Agcy./Other
Govt. Bonds

3Q23

63/64

$29,285

$11,156

$5,179

$1,294

$2,799

$1,484

$388

$18,129

$17,713

$416

3Q22

64/64

$31,440

$10,974

$5,124

$1,626

$2,592

$1,255

$361

$20,466

$20,133

$333

% Change

(7%)

2%

1%

(20%)

8%

18%

7%

(11%)

(12%)

25%

The number of active client firms reached a record 2,093, a positive lift of 6.1%. This includes the highest number of active US credit client firms and international active client firms, indicating a broadening customer base.

Future Outlook

The company has refined its full-year 2023 expense guidance, now ranging from $432.0 million to $438.0 million, including an estimated $12.5 million of M&A-related expenses. The effective tax rate for the full year is expected to be approximately 23.5%, lower than the previously stated range.

Therefore, while MarketAxess faces challenges due to low credit spread volatility and increased expenses, its diversified product offerings and strong client engagement provide a positive outlook for the future.

Recently, MarketAxxes cooperated with Bloomberg and Tradeweb to form a joint venture and establish an independent company with the goal of becoming the consolidated tape provider (CTP) for fixed-income instruments in the European Union.

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