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MarketAxess Holdings Inc. Boosts Dividend by 27%

By Joe Tenebruso - Feb 4, 2018 at 3:21PM

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After generating $160 million in free cash flow in 2017, the bond-trading network is set to deliver more cash into the hands of its shareholders in the year ahead.

MarketAxess Holdings (MKTX 0.69%) reported fourth-quarter results on Jan. 31. The electronic trading platform for corporate bonds and other fixed-income securities continues to dominate its core markets, prompting management to boost its cash payout to investors.

MarketAxess: The raw numbers

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$99.565 million

$94.436 million

5%

Pre-tax income

$49.371 million

$50.327 million

(2%)

Earnings per share

$0.88

$0.88

0%

Data source: MarketAxess Q4 2017 earnings release.

What happened with MarketAxess this quarter?

Global trading volume grew by 5%, to $355.6 billion, fueled by a 26% jump in emerging-market trading volume.

Notably, MarketAxess' share of the U.S. high-grade and high-yield electronic market rose to an estimated 86% in 2017, up from 80% the prior year, according to a study by Greenwich Associates.

MarketAxess' revenue increased 5.4% to $99.6 million, driven by a 2.9% rise in commission revenue, to $88 million, and a 30% climb in all other revenue (information services, post-trade services, and investment), to $11.6 million.

Operating expenses increased 13.8% to $50.2 million, mostly because of higher employee compensation and technology costs. In turn, pre-tax income declined 1.9% to $49.4 million, as pre-tax margin fell to 49.6% from 53.3% in the year-ago quarter.

All told, net income -- aided by a lower effective tax rate -- inched up less than 1% to $33.5 million, or $0.88 per share. 

Cash flow and capital returns

For the full year, MarketAxess produced $160 million in free cash flow, up from $145 million in 2016. Management remains committed to passing a sizable portion of this cash on to shareholders; the company boosted its quarterly dividend by 27%, to $0.42.

A person handing cash to the outstretched hand of another person

MarketAxess will be paying out more cash to investors in the year ahead. Image source: Getty Images.

Looking forward

Management expects 2018 full-year expenses in the range of $220 million to $232 million and capital expenditures of $43 million to $50 million.

MarketAxess also anticipates that its effective tax rate will fall to between 23% and 25%, down from 26.6% in 2017, mainly because of the impact of the Tax Act.

"As we enter 2018, we are encouraged to see signs of more normal fixed-income trading conditions, including improving global economic growth and declining central bank quantitative easing," the company said in a press release. "Client adoption of electronic trading in fixed income continues to grow, and our international client diversification creates a valuable foundation for long-term growth."

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Stocks Mentioned

MarketAxess Holdings Inc. Stock Quote
MarketAxess Holdings Inc.
MKTX
$257.77 (0.69%) $1.76

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