MarketAxess Holdings (MKTX 1.52%) reported first-quarter results on April 25. The electronic trading platform for corporate bonds and other fixed-income securities delivered solid increases in revenue and profits, fueled by record trading across its product offerings.
MarketAxess results: The raw numbers
|
Metric |
Q1 2018 |
Q1 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$114.7 million |
$103 million |
11.4% |
|
Net income |
$47.9 million |
$42.5 million |
12.9% |
|
Earnings per share |
$1.27 |
$1.11 |
14.4% |
Data source: MarketAxess' Q1 2018 earnings release.
Image source: Getty Images.
What happened with MarketAxess this quarter?
Commission revenue rose 9.3% to $102.8 million, with variable transaction fees increasing 2.5% to $79.8 million. All other revenue -- which includes information services, post-trade services, and investment revenue -- jumped 33.7% to $11.9 million.
"Trading volumes and commission revenue benefited from a modest improvement in market volatility during the quarter," Chairman and CEO Rick McVey said in a press release. "MiFID II implementation led to record trading volumes and post-trade revenue."
Global trading volume soared 17.9%, to $465 billion, as MarketAxess enjoyed record volume across all four of its core product lines: U.S. high-grade, high-yield, Eurobonds, and emerging market bonds. International client trading volume was particularly strong at $129.6 billion, representing a year-over-year increase of 30.1%.
Importantly, MarketAxess' share of the U.S. high-grade market also continued its ascent, rising to an estimated 18% in the first quarter, up from 15.9% in the year-ago period.
Image source: MarketAxess' Q1 2018 earnings presentation.
Operating expense growth of 14.1% outpaced revenue growth during the quarter, but that was mostly due to higher costs related to the build-out of MarketAxess' new corporate offices in New York. In turn, operating margin came in at 52.5% compared to 53.6% in the prior-year quarter, with operating income rising 9.1% to $60.2 million.
All told, net income, which benefited from a lower effective tax rate, increased 12.9% to $47.9 million. And earnings per share -- boosted by the $6.3 million in share repurchases MarketAxess conducted during the first quarter -- jumped 14.4% to $1.27 per share.
Looking forward
CFO Antonio DeLise warned of weaker trading volumes in the second quarter during a conference call with analysts:
April has seen a reversion to 2017 tight market conditions with a decline in volatility and credit spreads. Aggregate estimated market volumes for our four core products are down around 14% from the first-quarter levels. With four important trading days remaining in April, estimated U.S. high-grade and high-yield market share is running below first-quarter levels but similar to share posted in January.
Still, short-term fluctuations in trading volumes should only have a minor effect on MarketAxess' long-term trajectory. As long as the company can continue to take share in the massive global bond market, investors are likely to be well-rewarded in the years ahead.
