MarketAxess Holdings Inc. Revenue Ticks Higher on International Expansion

Markets Motley Fool

MarketAxess Holdings (NASDAQ: MKTX) reported second-quarter results on July 26. The fixed-income trading platform's robust international growth is being fueled by a powerful combination of more clients in more markets trading more often, which, in turn, is helping to drive overall revenue and profits higher.

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MarketAxess: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$97.314 million

$96.639 million

0.7%

Pre-tax income

$49.573 million

$50.551 million

(1.9%)

Earnings per share

$1.00

$0.88

13.6%

What happened with MarketAxess this quarter?

MarketAxess' share of the U.S. high-grade credit market continued its ascent, increasing to an estimated 17%, up from 16.1% in the prior-year quarter. International growth was also a highlight, as MarketAxess' international client volume jumped 24%, to $92 billion, driven by a 31% increase in the number of active clients, to 579 firms.

"Our geographic expansion has been a key driver of revenue and earnings growth, with significant gains in the number of active clients, and emerging market trading activity," Chairman and CEO Richard McVey said in a press release.

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The bond-trading network's total trading volume rose 6.9% year over year, to $361.5 billion. Yet variable transaction fees increased only 0.4%, to $70.6 million, as lower average transaction fees mostly offset the benefit from higher volumes. All other revenue -- consisting of information and post-trade services, technology products and services, and investment income -- declined slightly, to $10.3 million, mostly due to currency fluctuations. In all, MarketAxess' total revenue inched up less than 1% year over year, to $97.3 million.

With total expenses coming in 3.6% higher, at $47.7 million -- primarily due to higher marketing costs -- MarketAxess' pre-tax income fell 1.9%, to $49.6 million, as pre-tax margin decreased to 50.9% from 52.3% in the year ago period.

All told, net income -- aided by a lower effective tax rate -- increased 14.8%, to $38 million, and earnings per share rose 13.6%, to $1.00 per share.

Looking forward

MarketAxess reiterated its full-year 2017 guidance, including:

  • total expenses of $192 million to $208 million
  • capital spending of $25 million to $30 million
  • overall effective tax rate of 26% to 28%

"We posted our second best quarter ever for trading volume, revenue and diluted EPS in spite of the continued lackluster market environment," added McVey. "We continue to build upon the strong foundation of our global business which we expect will drive further positive momentum when market activity improves."

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends MarketAxess Holdings. The Motley Fool has a disclosure policy.