GlobeNewswire Inc | Jan 27, 2021 06:30AM EST

January 27, 2021

12 Consecutive Years of Record Volume, Revenue and Earnings

Company Announces Increase in Regular Quarterly Dividend to $0.66 per Share, up from $0.60

Fourth Quarter Financial Highlights*

-- Revenues of $171.3 million, up 32% -- Operating income of $91.7 million, up 51% -- Operating margin of 53.5%, up from 46.9% -- Diluted EPS of $1.91, up 45% from $1.32 -- Open Tradingcredit volume of $218.1 billion, up 63% -- Record Estimated U.S. high-grade market share of 22.8%, up from 19.9% -- Record Estimated U.S. high-yield market share of 17.1%, up from 10.6%

*All comparisons versus fourth quarter 2019.

Full Year 2020 Financial Highlights*

-- Record revenues of $689.1 million, up 35% -- Record operating income of $374.7 million, up 49% -- Record operating margin of 54.4%, up from 49.1% -- Record diluted EPS of $7.85, up 45% from $5.40 -- Record Open Tradingcredit volume of $861.1 billion, up 61%

*All comparisons versus full year 2019.

NEW YORK, Jan. 27, 2021 (GLOBE NEWSWIRE) -- MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for fixed-income securities, and the provider of market data and post-trade services for the global fixed-income markets, today announced results for the quarter and year ended December 31, 2020.

In the midst of an economic crisis brought on by the pandemic, the value delivered to our clients through our unique liquidity solutions surged to new all-time highs in 2020, said Rick McVey, Chairman and CEO of MarketAxess. New sources of liquidity delivered through Open Trading drove over $1 billion in estimated transaction cost savings to our clients, exceeding total company revenue. Strong market share gains in all core trading products drove revenue growth of 35% for the year, and operating income growth of 49%. In addition, we continue to expand our product pipeline for future growth with new initiatives in Rates, Munis, Data and Post-Trade Services. New records were achieved in active clients trading with over 1,800 institutional investor and dealer firms now utilizing our global marketplace.

Fourth Quarter Results

Total revenues for the fourth quarter of 2020 increased 32.0% to $171.3 million, compared to $129.8 million for the fourth quarter of 2019. Operating income was $91.7 million, compared to $60.9 million for the fourth quarter of 2019, an increase of 50.7%. Operating margin was 53.5%, compared to 46.9% for the fourth quarter of 2019. Net income totaled $72.9 million, or $1.91 per share on a diluted basis, compared to $50.3 million, or $1.32 per share, for the fourth quarter of 2019.

Commission revenue for the fourth quarter of 2020 increased 33.1% to $155.8 million, compared to $117.1 million for the fourth quarter of 2019. Variable transaction fees increased 40.1% to $128.0 million for the fourth quarter of 2020, compared to variable transaction fees of $91.3 million for the fourth quarter of 2019. U.S. high-grade trading volume as a percentage of FINRAs high-grade TRACE trading volume increased to an estimated 22.8% for the fourth quarter of 2020, compared to an estimated 19.9% for the fourth quarter of 2019.

All other revenue, which consists of information services, post-trade services and other revenue, increased to $15.5 million, compared to $12.7 million for the fourth quarter of 2019. The increase in all other revenue was principally due to $1.3 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub since the November 30, 2020 acquisition date and $0.5 million of revenue due to the introduction of new Securities Finance Transaction Regulation (SFTR) reporting services.

Total expenses for the fourth quarter of 2020 increased 15.6% to $79.6 million, compared to $68.9 million for the fourth quarter of 2019. The increase in total expenses was largely due to higher professional and consulting fees of $3.9 million, mainly attributable to self-clearing consulting fees of $1.3 million and acquisition related costs of $1.2 million; employee compensation and benefit costs of $3.4 million, mainly due to an increase in headcount; depreciation and amortization of $2.9 million; clearing costs of $1.7 million, mainly due to increased Open Trading activity; offset by a decrease in marketing and advertising expenses of $0.8 million on lower travel and entertainment spend. Expenses in the fourth quarter of 2020 reflect costs associated with the Regulatory Reporting Hub transaction totaling $2.4 million, including integration costs of $1.2 million, amortization of acquired intangibles expense of $0.8 million and deal-related transaction costs of $0.4 million. Excluding the Regulatory Reporting Hub transaction related costs, total expenses for the quarter were up 12.1%.

The effective tax rate for the fourth quarter of 2020 was 19.2%, compared to 18.9% for the fourth quarter of 2019. The income tax provision for the fourth quarter of 2020 and 2019 reflected $6.2 million and $3.6 million, respectively, of excess tax benefits related to share-based compensation awards.

Full Year 2020 Results

Total revenues for the year ended December 31, 2020 increased 34.8% to a record $689.1 million, compared to $511.4 million for 2019. Operating income was a record $374.7 million, compared to $250.9 million for 2019, an increase of 49.4%. Operating margin was 54.4%, compared to 49.1% for 2019. Net income totaled $299.4 million, or $7.85 per share on a diluted basis, compared to $204.9 million, or $5.40 per share, for 2019.

Commission revenue for the year ended December 31, 2020 increased 36.8% to a record $634.4 million, compared to $463.9 million for 2019. Variable transaction fees increased 43.3% to $526.3 million compared to variable transaction fees of $367.2 million for 2019. Variable transaction fees in 2020 include approximately $13.1 million of U.S. Treasuries trading commissions related to the November 2019 acquisition of LiquidityEdge LLC, now operating as MarketAxess Rates, compared to $2.4 million in 2019. U.S. high-grade trading volume as a percentage of FINRAs high-grade TRACE trading volume increased to an estimated 21.6%, compared to an estimated 19.0% for 2019. All other revenue increased 15.1% to $54.7 million in 2020, compared to $47.5 million for 2019. The increase in all other revenue was principally due to $3.6 million of new data sales, $1.3 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub since the November 30, 2020 acquisition date and $0.9 million of revenue due to the introduction of new SFTR reporting services.

Total expenses for the year ended December 31, 2020 increased 20.7% to $314.4 million, compared to $260.5 million for 2019. The increase in total expenses was principally due to higher employee compensation and benefits costs of $25.8 million, mainly due to an increase in headcount; clearing costs of $9.7 million, principally due to increased Open Trading activity; depreciation and amortization of $9.1 million; technology and communications costs of $7.3 million; professional and consulting fees of $6.8 million; offset by a decrease in marketing and advertising costs of $3.6 million. Excluding LiquidityEdge and Regulatory Reporting Hub expenses, total expenses for the year were up 15.2%.

The effective tax rate for 2020 was 20.0%, compared to 20.4% for 2019. The income tax provision for 2020 and 2019 reflected $24.1 million and $10.6 million, respectively, of excess tax benefits related to share-based compensation awards.

Employee headcount was 606 as of December 31, 2020 compared to 527 as of December 31, 2019. The increase in headcount was due to the continued investment in the Companys growth initiatives, including geographic expansion, trading automation, new trading protocols and the transition to self-clearing.

Dividend

The Companys board of directors declared a 10% increase in the quarterly cash dividend to $0.66 per share of common stock outstanding, to be paid on February 24, 2021 to stockholders of record as of the close of business on February 10, 2021.

Share Repurchases

A total of 1,400 shares were repurchased in the fourth quarter of 2020 at a cost of $0.7 million. In January 2021, the Board of Directors authorized a new repurchase program for up to $100 million of the Companys common stock. The Company expects repurchases under the new program to commence in April 2021 following the expiration of the current plan.

Balance Sheet Data

As of December 31, 2020, total assets were $1.3 billion and included $489.0 million in cash, cash equivalents and investments. Total stockholders equity as of December 31, 2020 was $955.1 million.

Guidance for 2021

For 2021, the Company is providing the following guidance:

-- Expenses are expected to be in the range of $362.0 million to $382.0 million and includes a full year of Regulatory Reporting Services expenses estimated to range between $15.0 million to $18.0 million. In addition to ongoing operating expenses, the 2021 acquisition expenses include estimated amortization expense on acquired intangible assets of $5.0 million and non-recurring integration costs of $5.0 million. Excluding the expenses related to Regulatory Reporting Hub, the midpoint in the guidance range on a constant currency basis would represent an approximate 13.0% year-over-year increase in expenses. -- Capital expenditures are expected to be in the range of $50.0 million to $55.0 million and include an expected increase in capitalized software development to support new protocols, products and platform enhancements. -- The Companys overall effective tax rate is expected to be between 22.0% to 24.0% and reflects a lower benefit from estimated excess tax benefits on share-based compensation awards.

Non-GAAP Financial Measures and Other Items

To supplement the Companys unaudited financial statements presented in accordance with generally accepted accounting principles (GAAP), the Company uses certain non-GAAP measures of financial performance, including earnings before interest, taxes, depreciation and amortization (EBITDA) and free cash flow. The Company believes that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in understanding the Companys operating results. See the attached schedule for a reconciliation of GAAP net income to EBITDA and GAAP cash flow from operating activities to free cash flow.

Webcast and Conference Call Information

Rick McVey, Chairman and Chief Executive Officer,Chris Concannon, President and Chief Operating Officer andTony DeLise, Chief Financial Officer, will host a conference call to discuss the Companys financial results and outlook onWednesday, January 27, 2021at10:00 a.m. EST. To access the conference call, please dial 855-425-4206 (U.S.) or 484-756-4249 (international). The Company will also host a live audio Webcast of the conference call on the Investor Relations section of the Companys website at http://investor.marketaxess.com. A replay of the call will be made available by dialing 855-859-2056 (U.S.) or 404-537-3406 (international) and using the conference ID: 3091967 for one week after the announcement. The Webcast will also be archived on http://investor.marketaxess.com for 90 days following the announcement.

About MarketAxess

MarketAxess operates a leading, institutional electronic trading platform delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income markets. A global network of over 1,800 firms, including the worlds leading asset managers and institutional broker-dealers, leverages MarketAxess patented trading technology to efficiently trade bonds. MarketAxess award-winning Open Trading marketplace is regarded as the preferred all-to-all trading solution in the global credit markets, creating a unique liquidity pool for a broad range of credit market participants. Drawing on its deep data and analytical resources, MarketAxess provides automated trading solutions, market data products and a range of pre- and post-trade services.

MarketAxess is headquartered in New York and has offices in London, Amsterdam, Boston, Chicago, Los Angeles, Miami, San Francisco, So Paulo, Hong Kong and Singapore. For more information, please visit www.marketaxess.com.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements, including statements about the outlook and prospects for Company and industry growth, as well as statements about the Companys future financial and operating performance. These and other statements that relate to future results and events are based on MarketAxess current expectations. The Companys actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including: global economic, political and market factors; the volatility of financial services markets generally; the level of trading volume transacted on the MarketAxess platform; the absolute level and direction of interest rates and the corresponding volatility in the corporate fixed-income market; the level and intensity of competition in the fixed-income electronic trading industry and the pricing pressures that may result; the variability of our growth rate; the rapidly evolving nature of the electronic financial services industry; our ability to introduce new fee plans and our clients response; our exposure to risks resulting from non-performance by counterparties to transactions executed between our clients in which we act as an intermediary in matched principal trades; our dependence on our broker-dealer clients; the loss of any of our significant institutional investor clients; our ability to develop new products and offerings and the markets acceptance of those products; the effect of rapid market or technological changes on us and the users of our technology; our ability to successfully maintain the integrity of our trading platform and our response to system failures, capacity constraints and business interruptions; our vulnerability to cyber security risks; our ability to protect our intellectual property rights or technology and defend against intellectual property infringement or other claims; our ability to enter into strategic alliances and to acquire other businesses and successfully integrate them with our business; our ability to comply with new and existing laws, rules and regulations both domestically and internationally; our ability to maintain effective compliance and risk management methods; the strain of growth initiatives on management and other resources; our future capital needs and our ability to obtain capital when needed; limitations on our operating flexibility contained in our credit agreement; and other factors. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. More information about these and other factors affecting MarketAxess business and prospects is contained in MarketAxess periodic filings with the Securities and Exchange Commission and can be accessed at www.marketaxess.com.

Media and Investor Relations Contacts:

David Cresci William McBrideMarketAxess Holdings Inc. RF|Binder+1-212-813-6027 +1-917-239-6726 Kyle White MarketAxess Holdings Inc. +1-212-813-6355

MarketAxess Holdings Inc. Consolidated Statements of Operations Three Months Ended Year Ended December31, December31, 2020 2019 2020 2019 (In thousands, except per share data) (unaudited) Revenues Commissions $ 155,813 $ 117,103 $ 634,445 $ 463,856 Information services 8,771 8,515 34,341 30,730 Post-trade services 6,564 3,923 19,460 15,763 Other 198 233 879 1,003 Total revenues 171,346 129,774 689,125 511,352 Expenses Employee compensation and 36,472 33,117 156,885 131,079 benefitsDepreciation and amortization 10,592 7,730 35,996 26,857 Technology and communications 8,922 7,155 34,092 26,792 Professional and consulting 10,295 6,389 32,304 25,534 feesOccupancy 3,220 3,090 13,425 11,639 Marketing and advertising 2,307 3,087 7,940 11,559 Clearing costs 4,997 3,345 21,058 11,314 General and administrative 2,844 5,010 12,697 15,696 Total expenses 79,649 68,923 314,397 260,470 Operating income 91,697 60,851 374,728 250,882 Other income (expense) Investment income 119 1,767 2,446 8,063 Interest expense (96 ) ? (1,142 ) ? Other, net (1,431 ) (661 ) (1,673 ) (1,521 )Total other income (expense) (1,408 ) 1,106 (369 ) 6,542 Income before income taxes 90,289 61,957 374,359 257,424 Provision for income taxes 17,358 11,684 74,982 52,522 Net income $ 72,931 $ 50,273 $ 299,377 $ 204,902 Per Share Data: Net income per common share Basic $ 1.95 $ 1.35 $ 8.01 $ 5.53 Diluted $ 1.91 $ 1.32 $ 7.85 $ 5.40 Cash dividends declared per $ 0.60 $ 0.51 $ 2.40 $ 2.04 common share Weighted-average common shares: Basic 37,405 37,176 37,359 37,083 Diluted 38,188 38,091 38,144 37,956

MarketAxess Holdings Inc. Commission Revenue Details Three Months Ended Year Ended December31, December31, 2020 2019 2020 2019 Total Commissions Revenue (In thousands) (unaudited) Transaction FeesU.S. $ 59,645 $ 43,120 $ 253,684 $ 173,944 high-gradeOther credit ^ 65,045 45,238 256,763 188,514 1Total credit 124,690 88,358 510,447 362,458 Rates ^2 3,267 2,983 15,890 4,722 Totaltransaction 127,957 91,341 526,337 367,180 fees Distribution FeesU.S. 21,524 18,647 81,893 71,885 high-gradeOther credit^1 6,261 7,029 25,834 24,347 Total credit 27,785 25,676 107,727 96,232 Rates^2 71 86 381 444 Totaldistribution 27,856 25,762 108,108 96,676 feesTotal $ 155,813 $ 117,103 $ 634,445 $ 463,856 commissions Average Variable Transaction Fee Per Million (unaudited) U.S.high-grade - $ 193.51 $ 177.27 $ 191.34 $ 171.06 fixed-rateU.S.high-grade - 40.14 53.64 48.21 63.15 floating-rateTotal U.S. 187.27 170.36 185.40 164.44 high-gradeOther credit ^ 202.55 191.36 203.45 193.45 1Total credit 194.94 180.50 194.06 178.35 Rates^2 3.95 4.81 3.99 7.16 ^1 Other credit includes high-yield, emerging markets, Eurobonds and municipal bonds.^2 Rates includes U.S. Government bonds, agencies and other government bonds.

MarketAxess Holdings Inc. Consolidated Condensed Balance Sheet Data As of December 31, December 31, 2020 2019 (In thousands) (unaudited) Assets Cash and cash equivalents $ 460,858 $ 270,124 Cash segregated under federal regulations 50,059 ? Investments, at fair value 28,111 230,477 Accounts receivable, net 79,577 62,017 Receivables from broker-dealers, clearing 279,915 ? organizations and customersGoodwill 147,388 146,861 Intangible assets, net of accumulated 95,354 60,986 amortizationFurniture, equipment, leasehold improvementsand capitalized 85,204 71,795 software, netOperating lease right-of-use assets 75,924 81,399 Prepaid expenses and other assets 28,708 30,770 Deferred tax assets, net 331 501 Total assets $ 1,331,429 $ 954,930 Liabilities and stockholders? equity Liabilities Accrued employee compensation $ 62,326 $ 47,365 Payables to broker-dealers, clearing 133,326 ? organizations and customersIncome and other tax liabilities 42,750 16,690 Deferred revenue 4,248 3,499 Accounts payable, accrued expenses and other 40,106 19,294 liabilitiesOperating lease liabilities 93,612 97,991 Total liabilities 376,368 184,839 Stockholders? equity Common stock 123 122 Additional paid-in capital 329,742 342,541 Treasury stock (169,523 ) (153,388 )Retained earnings 799,369 591,086 Accumulated other comprehensive loss (4,650 ) (10,270 )Total stockholders? equity 955,061 770,091 Total liabilities and stockholders? equity $ 1,331,429 $ 954,930

MarketAxess Holdings Inc. Reconciliation of Non-GAAP Financial Measures Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019 Earnings Before Interest, Taxes, Depreciation and Amortization (In thousands) (unaudited) Net income $ 72,931 $ 50,273 $ 299,377 $ 204,902 Add back: Interest expense 96 ? 1,142 ? Provision for income 17,358 11,684 74,982 52,522 taxesDepreciation and 10,592 7,730 35,996 26,857 amortizationEarnings before interest,taxes, depreciation and $ 100,977 $ 69,687 $ 411,497 $ 284,281 amortization Free Cash Flow (In thousands) (unaudited) Cash flows from operating $ 227,620 $ 89,141 $ 404,489 $ 265,935 activitiesExclude: Net change in (5,316 ) (4,416 ) (67,952 ) (4,045 )trading investmentsExclude: Net change infail-to-deliver/receivefrom broker-dealers, (115,519 ) ? 49,278 ? clearing organizationsand customersLess: Purchases offurniture, equipment and (1,988 ) (3,609 ) (15,010 ) (12,292 )leasehold improvementsLess: Capitalization ofsoftware development (9,494 ) (8,545 ) (30,618 ) (22,408 )costsFree cash flow $ 95,303 $ 72,571 $ 340,187 $ 227,190

MarketAxess Holdings Inc. Volume Statistics* Three Months Ended Year Ended December31, December31, 2020 2019 2020 2019 Total Trading Volume (In millions) (unaudited) U.S. high-grade - $ 305,537 $ 238,959 $ 1,311,512 $ 992,844 fixed-rateU.S. high-grade - 12,956 14,150 56,786 64,980 floating-rateTotal U.S. high-grade 318,493 253,109 1,368,298 1,057,824 Other credit 321,135 236,403 1,262,074 974,494 Total credit 639,628 489,512 2,630,372 2,032,318 Rates 826,276 620,437 3,987,424 659,548 Average Daily Volume (In millions) (unaudited) U.S. high-grade $ 5,137 $ 4,082 $ 5,451 $ 4,231 Other credit 5,140 3,783 5,014 3,886 Total credit 10,277 7,865 10,465 8,117 Rates 13,327 10,007 15,886 2,638 Number of U.S. Trading 62 62 251 250 Days^ 1Number of U.K. Trading 64 64 254 253 Days^ 2 ^1 The number of U.S. trading days is based on the SIFMA holiday recommendation calendar.^2 The number of U.K. trading days is based on the U.K. Bank holiday schedule. *Consistent with FINRA TRACE reporting standards, both sides of trades areincluded in the Company?s reported volumes when the Company executes trades on a matched principal basis between two counterparties. Consistent with industrystandards, U.S. Government Bond trades are single-counted.