Please ensure Javascript is enabled for purposes of website accessibility

Share Gains Boost MarketAxess Holdings Inc. Earnings

By Joe Tenebruso - Apr 28, 2016 at 11:52AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The electronic trading platform is winning a larger share of the massive global fixed-income market.

MarketAxess Holdings (MKTX 1.26%) reported first-quarter results on April 27. Revenue leapt 15.4% year over year to $88.6 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 14.9% from 13.7% in Q1 2015, bolstered by a 22% increase in trading volume. Yet volume growth was even more significant in MarketAxess' other segments, with emerging markets, U.S. high-yield, and Eurobond volumes soaring 36%, 45%, and 54%, respectively.

Image source: MarketAxess Q1 2016 earnings presentation.

In all, total trading volume surged 27.2% to $310 billion, helping to drive an 18% increase in commission revenue to $79.1 million, including a 22.9% jump in variable transaction fees to $63.1 million.

All other revenue -- consisting of information and post-trade services, as well as investment income -- fell 2.8% to $9.5 million, primarily because of lower consulting fees and unfavorable foreign exchange movements.

Higher employee compensation costs, marketing expenses, and clearing costs led to a 15% increase in total expenses to $44.2 million. With expenses outpacing revenue growth during the quarter, pre-tax margin declined slightly to 50.1%, down from 50.2% in the first quarter of 2015.

All told, net income, which benefited from a lower effective tax rate compared with the prior year period, leapt 17.8% to $29 million. And earnings per share, boosted by stock buybacks, jumped 18.5% to $0.77.

"Our results this quarter show a strong start to 2016," said Chairman and CEO Richard McVey in a press release. "The combination of strong market share growth across each of our core products and healthier U.S. market volumes resulted in record trading volumes, revenues, pre-tax income, and EPS."

Capital returns
With its strong free cash flow generation and fortress-like balance sheet -- including more than $285 million in cash and investments and no long-term debt as of the end of the first quarter -- MarketAxess is able to reward its investors with stock buybacks and rising dividend payments.

Image source: MarketAxess Q1 2016 earnings presentation.

In this regard, the company repurchased 9,852 shares during the first quarter at a cost of $1.2 million. An additional $23.8 million was still available for future stock buybacks at the end of the first quarter under MarketAxess' current share repurchase program.

Looking ahead
Management reiterated its 2016 full-year guidance, including total expenses in the range of $168 million to $176 million and capital spending in the range of $18 million to $22 million. 

"We continue to invest in new Open Trading protocols, expanding our capabilities outside of the United States, and extending our trading platform to new product areas," added McVey. "We are excited about our recent municipal bond trading launch and the opportunity to deliver broader access to liquidity, better price discovery, and greater efficiency to this highly fragmented and manually reliant market."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

MarketAxess Holdings Inc. Stock Quote
MarketAxess Holdings Inc.
MKTX
$280.03 (1.26%) $3.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
332%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.