GlobeNewswire Inc | Jul 21, 2021 06:30AM EDT

July 21, 2021

Second Quarter Highlights*

-- Revenues of $176.3 million, down 5% -- Operating income of $87.2 million, down 16% -- Operating margin of 49.4% -- Diluted EPS of $1.77, down 20% from $2.20 -- 2-year compound annual growth rates of 19% for revenue and 20% for operating income compared to second quarter of 2019 -- Estimated U.S. high-grade market share of 21.1% -- Record municipal bond trading volume; closed MuniBrokers transaction in April 2021 -- Emerging market trading volume up 11%; estimated market volumes down 17% -- Record active total client firms of 1,842 and international client firms of 930

*All comparisons versus second quarter 2020 unless otherwise stated.

NEW YORK, July 21, 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 ended June 30, 2021.

Second quarter results were heavily impacted by low levels of credit market volatility in a very tough year over year comparison for MarketAxess, said Chairman and CEO Rick McVey. We are proud of the Companys record results achieved last Spring during elevated credit spread volatility and high market volume caused by the Pandemic and, though we were not able to duplicate those results, we believe the Companys long-term revenue and earnings growth rates remain on track. In addition to consistent long-term growth in our core business, we are excited about the progress we are making in our international business, emerging markets, municipal bonds, and new trading protocols. We believe our investments are creating a much broader foundation for future growth that will be evident when more normal levels of volatility return to fixed income markets.

Second Quarter Results

Total revenues for the second quarter of 2021 decreased 4.6% to $176.3 million, compared to $184.8 million for the second quarter of 2020. Operating income was $87.2 million, compared to $104.1 million for the second quarter of 2020, a decrease of 16.3%. Operating margin was 49.4%, compared to 56.4% for the second quarter of 2020. Net income totaled $67.3 million, or $1.77 per share on a diluted basis, compared to $83.9 million, or $2.20 per share, for the second quarter of 2020.

Commission revenue for the second quarter of 2021 decreased 9.1% to $156.4 million, compared to $172.1 million for the second quarter of 2020. Variable transaction fees decreased 13.0% to $127.1 million for the second quarter of 2021, compared to variable transaction fees of $146.0 million for the second quarter of 2020. Commission revenue includes $1.1 million generated by MuniBrokers, which was acquired in April 2021. U.S. high-grade trading volume as a percentage of FINRAs high-grade TRACE trading volume was an estimated 21.1% for the second quarter of 2021, compared to an estimated 21.5% for the second quarter of 2020. Estimated U.S. credit TRACE trading volume decreased by 18.7% year-over-year.

All other revenue, which consists of information services, post-trade services and other revenue, increased to $19.9 million, compared to $12.7 million for the second quarter of 2020. The increase in all other revenue was principally due to $3.8 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub, which was acquired from Deutsche Brse Group in November 2020, and $1.3 million of revenue due to the weaker U.S. dollar to U.K. pound sterling exchange rate.

Total expenses for the second quarter of 2021 increased 10.5% to $89.2 million, compared to $80.7 million for the second quarter of 2020. The increase in total expenses was largely due to higher depreciation and amortization of $4.8 million, which includes $2.8 million of acquired intangibles expense; higher professional and consulting fees of $2.6 million, mainly attributable to non-recurring integration costs associated with the Regulatory Reporting Hub transaction of $1.3 million and self-clearing consulting fees of $0.7 million; and higher technology and communication costs of $2.0 million which was partially offset by a decrease in clearing costs of $1.3 million. Expenses in the second quarter of 2021 reflect operating expenses and costs associated with the MuniBrokers and Regulatory Reporting Hub businessess totaling $5.1 million. Excluding the MuniBrokers and Regulatory Reporting Hub expenses, total expenses for the quarter were up 4.2%.

The effective tax rate for the second quarter of 2021 was 21.8%, compared to 19.7% for the second quarter of 2020. The income tax provision for the second quarter of 2021 and 2020 reflected $5.6 million and $5.7 million, respectively, of excess tax benefits related to share-based compensation awards.

Employee headcount was 637 as of June 30, 2021 compared to 561 as of June 30, 2020. 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 quarterly cash dividend to $0.66 per share of common stock outstanding, to be paid on August 18, 2021 to stockholders of record as of the close of business on August 4, 2021.

Share Repurchases

A total of 28,701 shares were repurchased in the second quarter of 2021 at a cost of $13.4 million.

Balance Sheet Data

As of June 30, 2021, total assets were $1.5 billion and included $449.5 million in cash, cash equivalents and investments. Total stockholders equity as of June 30, 2021 was $1.0 billion.

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 Company's 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 on Wednesday, July 21, 2021at10:00 a.m. EDT. 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 Company's 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: 5230777 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

MarketAxessoperates 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,MarketAxessprovides automated trading solutions, market data products and a range of pre- and post-trade services. For more information, please visitwww.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; risks relating to the COVID-19 pandemic, including the possible effects of the economic conditions worldwide resulting from the COVID-19 pandemic; risks related to the U.K. exit from the European Union; the level of trading volume transacted on the MarketAxess platform; the rapidly evolving nature of the electronic financial services industry; 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; our ability to introduce new fee plans and our clients response; our ability to attract clients or adapt our technology and marketing strategy to new markets; risks related to our growing international operations; our dependence on our broker-dealer clients; the loss of any of our significant institutional investor clients; 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; risks related to self-clearing; the effect of rapid market or technological changes on us and the users of our technology; our dependence on third-party suppliers for key products and services; our ability to successfully maintain the integrity of our trading platform and our response to system failures, capacity constraints and business interruptions; the occurrence of design defects, errors, failures or delays with our platforms; our vulnerability to cyber security risks; our actual or perceived failure to comply with privacy and data protection laws; 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 dependence on our management team and our ability to attract and retain talent; limitations on our flexibility because we operate in a highly regulated industry; the increasing government regulation of us and our clients; our exposure to costs and penalties related to our extensive regulation; our risks of litigation and securities laws liability; 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 Six Months Ended June 30, June 30, 2021 2020 2021 2020 (In thousands, except per share data) (unaudited) Revenues Commissions $ 156,431 $ 172,092 $ 332,269 $ 328,046 Information services 9,844 8,427 19,006 17,069 Post-trade services 9,848 4,054 20,109 8,207 Other 211 222 414 451 Total revenues 176,334 184,795 371,798 353,773 Expenses Employee compensation and 40,732 41,636 88,820 82,830 benefitsDepreciation and amortization 13,097 8,305 24,876 16,372 Technology and communications 10,544 8,592 20,580 16,753 Professional and consulting 10,704 8,065 20,344 13,740 feesOccupancy 3,300 3,286 6,617 6,760 Marketing and advertising 3,128 1,810 4,332 4,485 Clearing costs 4,372 5,713 9,066 11,223 General and administrative 3,280 3,253 6,512 6,386 Total expenses 89,157 80,660 181,147 158,549 Operating income 87,177 104,135 190,651 195,224 Other income (expense) Investment income 107 714 214 1,983 Interest expense (171 ) ? (362 ) ? Other, net (1,060 ) (446 ) (2,649 ) (1,102 )Total other income (expense) (1,124 ) 268 (2,797 ) 881 Income before income taxes 86,053 104,403 187,854 196,105 Provision for income taxes 18,765 20,549 40,109 37,435 Net income $ 67,288 $ 83,854 $ 147,745 $ 158,670 Per Share Data: Net income per common share Basic $ 1.79 $ 2.25 $ 3.94 $ 4.25 Diluted $ 1.77 $ 2.20 $ 3.87 $ 4.16 Cash dividends declared per $ 0.66 $ 0.60 $ 1.32 $ 1.20 common share Weighted-average common shares: Basic 37,508 37,340 37,489 37,322 Diluted 38,104 38,153 38,129 38,115

MarketAxess Holdings Inc. Commission Revenue Details Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Total Commissions Revenue (In thousands) (unaudited) Transaction FeesU.S. $ 56,413 $ 75,208 $ 121,769 $ 133,178 high-gradeOther credit ^ 67,074 66,977 145,973 132,587 1Total credit 123,487 142,185 267,742 265,765 Rates ^2 3,612 3,846 7,755 9,432 Totaltransaction 127,099 146,031 275,497 275,197 fees Distribution FeesU.S. 21,373 19,635 42,343 39,609 high-gradeOther credit^1 7,895 6,329 14,299 12,987 Total credit 29,268 25,964 56,642 52,596 Rates^2 64 97 130 253 Totaldistribution 29,332 26,061 56,772 52,849 fees Total $ 156,431 $ 172,092 $ 332,269 $ 328,046 commissions Average Variable Transaction Fee Per Million (unaudited) U.S.high-grade - $ 179.02 $ 186.67 $ 182.21 $ 185.04 fixed-rateU.S.high-grade - 36.40 55.06 41.19 51.38 floating-rateTotal U.S. 174.11 181.41 177.13 178.86 high-gradeOther credit ^ 194.49 204.66 198.36 201.80 1Total credit 184.62 191.66 188.11 189.62 Rates^2 4.07 4.02 3.86 3.93 ^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 June 30, December 31, 2021 2020 (In thousands) (unaudited) Assets Cash and cash equivalents $ 413,612 $ 460,858 Cash segregated under federal regulations 50,108 50,059 Investments, at fair value 35,838 28,111 Accounts receivable, net 87,125 79,577 Receivables from broker-dealers, clearing 475,739 279,915 organizations and customersGoodwill 154,789 147,388 Intangible assets, net of accumulated 119,989 95,354 amortizationFurniture, equipment, leasehold improvementsand capitalized 93,108 85,204 software, netOperating lease right-of-use assets 73,906 75,924 Prepaid expenses and other assets 33,709 29,039 Total assets $ 1,537,923 $ 1,331,429 Liabilities and stockholders' equity Liabilities Accrued employee compensation $ 39,278 $ 62,326 Payables to broker-dealers, clearing 278,303 133,326 organizations and customersIncome and other tax liabilities 41,345 42,750 Accounts payable, accrued expenses and other 65,872 44,354 liabilitiesOperating lease liabilities 91,265 93,612 Total liabilities 516,063 376,368 Stockholders' equity Common stock 123 123 Additional paid-in capital 313,683 329,742 Treasury stock (183,479 ) (169,523 )Retained earnings 896,977 799,369 Accumulated other comprehensive loss (5,444 ) (4,650 )Total stockholders' equity 1,021,860 955,061 Total liabilities and stockholders' equity $ 1,537,923 $ 1,331,429

MarketAxess Holdings Inc. Reconciliation of Non-GAAP Financial Measures Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Earnings Before Interest, Taxes, Depreciation and Amortization (In thousands) (unaudited) Net income $ 67,288 $ 83,854 $ 147,745 $ 158,670 Add back: Interest expense 171 ? 362 ? Provision for income 18,765 20,549 40,109 37,435 taxesDepreciation and 13,097 8,305 24,876 16,372 amortizationEarnings before interest,taxes, depreciation and $ 99,321 $ 112,708 $ 213,092 $ 212,477 amortization Free Cash Flow (In thousands) (unaudited) Cash flows from operating $ 96,726 $ 104,853 $ 73,567 $ 225,222 activitiesExclude: Net change in 11,064 (6,880 ) 5,569 (63,274 )trading investmentsExclude: Net change infail-to-deliver/receivefrom broker-dealers, (26,596 ) ? 66,774 ? clearing organizationsand customersLess: Purchases offurniture, equipment and (5,552 ) (4,973 ) (9,809 ) (9,264 )leasehold improvementsLess: Capitalization ofsoftware development (8,384 ) (6,225 ) (16,459 ) (13,003 )costsFree cash flow $ 67,258 $ 86,775 $ 119,642 $ 139,681

MarketAxess Holdings Inc. Volume Statistics* Three Months Ended Six Months Ended June30, June 30, 2021 2020 2021 2020 Total Trading Volume (In millions) (unaudited) U.S.high-grade - $ 312,858 $ 398,006 $ 662,673 $ 710,194 fixed-rateU.S.high-grade - 11,153 16,574 24,779 34,380 floating-rateTotal U.S. 324,011 414,580 687,452 744,574 high-gradeOther credit 344,865 327,266 735,885 657,019 Total credit 668,876 741,846 1,423,337 1,401,593 Rates 888,267 955,594 2,009,135 2,400,472 Average Daily Volume (In millions) (unaudited) U.S. $ 5,143 $ 6,581 $ 5,544 $ 5,957 high-gradeOther credit 5,521 5,234 5,935 5,256 Total credit 10,664 11,815 11,479 11,213 Rates 14,113 15,169 16,203 19,204 Number of U.S.Trading Days^ 63 63 124 125 1Number of U.K.Trading Days^ 61 61 124 125 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.