Image source: Getty Images.

MarketAxess Holdings (MKTX -1.54%) reported second-quarter results on July 28. Revenue surged 28% year over year to $96.6 million as the electronic bond-trading network enjoyed record trading across all of its core product lines.

MarketAxess' share of the U.S. high-grade credit market rose to 16.1% from 14.8% in Q2 2015, bolstered by a 27% increase in trading volume. Yet volume growth was even more significant in MarketAxess' other segments, with U.S. high-yield, emerging markets, and Eurobond volumes soaring 47%, 57%, and 126%, respectively.

Image source: MarketAxess Q2 2016 Earnings Presentation.

In all, total trading volume jumped 38.2% to $338.3 billion, helping to drive an 29.9% increase in commission revenue to $86.2 million, including a 38.9% jump in variable transaction fees to $70.3 million.

All other revenue -- consisting of information and post-trade services, technology products and services, and investment income -- increased 14% to $10.4 million.

MarketAxess' operating leverage was once again on display in the second quarter as a 19.9% increase in total expenses to $46.1 million -- due mostly to higher employee compensation costs -- trailed revenue growth. That helped pre-tax margin improve to 52.3%, compared to 49.1% in the year-ago quarter, with pre-tax income rising 36.4% to $50.6 million.

All told, net income leapt 36.8% to $33.1 million. And earnings per share, boosted by stock buybacks, jumped 37.5% to $0.88.

Capital returns

With its strong free cash flow generation and fortress-like balance sheet -- including $299.6 million in cash and investments and no long-term debt as of the end of the second quarter -- MarketAxess continues to reward its investors with stock buybacks and rising dividend payments.

Image source: MarketAxess Q2 2016 Earnings Presentation.

The company repurchased 31,815 shares during the second quarter at a cost of $4.2 million. An additional $19.6 million was still available for future stock buybacks at the end of the second quarter under MarketAxess' current share repurchase program.

Looking ahead

MarketAxess updated its 2016 full-year guidance, including total expenses in the range of $178 million to $183 million, up from previous estimates of $168 million to $176 million. The company also reiterated its capital-spending forecast of between $18 million and $22 million. 

"MarketAxess continues to benefit from our leadership in providing innovative Open Trading solutions that expand liquidity options for our clients and reduce their costs of execution," said Chairman and CEO Richard McVey in a press release. "The accelerating growth rates in our business reflect the added value clients derive from the technology investments we are making and the power of the growing network of over 1,100 institutional firms active on our trading platform."