GlobeNewswire Inc | Oct 20, 2021 06:30AM EDT

October 20, 2021

Third Quarter Highlights*

-- Revenues of $162.1 million, down 1% -- Operating income of $74.0 million, down 16% -- Operating margin of 45.7% -- Diluted EPS of $1.52, down 15% from $1.78 -- Estimated U.S. high-grade market share of 21.4% -- Record active total client firms of 1,848 and international client firms of 934

*All comparisons versus third quarter 2020 unless otherwise stated.

NEW YORK, Oct. 20, 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 September 30, 2021.

"Growth in our global client network and adoption of automated solutions continued in the third quarter in spite of generally weak secondary trading conditions in global credit trading. Credit spreads and credit spread volatility have remained at historically low levels throughout the year," said Rick McVey, chairman and CEO of MarketAxess. "Investments in our international client business are paying off with record estimated market share in Eurobonds and strong trends in global Emerging Markets bond trading. Combined data and post-trade revenue also reached a new record this quarter, providing an important source of diversification."

Third Quarter Results

Total revenues for the third quarter of 2021 decreased 1.2% to $162.1 million, compared to $164.0 million for the third quarter of 2020. Operating income was $74.0 million, compared to $87.8 million for the third quarter of 2020, a decrease of 15.7%. Operating margin was 45.7%, compared to 53.5% for the third quarter of 2020. Net income totaled $58.0 million, or $1.52 per share on a diluted basis, compared to $67.8 million, or $1.78 per share, for the third quarter of 2020.

Commission revenue for the third quarter of 2021 decreased 5.2% to $142.8 million, compared to $150.6 million for the third quarter of 2020. Variable transaction fees decreased 9.0% to $112.1 million for the third quarter of 2021, compared to variable transaction fees of $123.2 million for the third quarter of 2020. Commission revenue includes $1.2 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 21.4% for the third quarter of 2021, compared to an estimated 22.2% for the third quarter of 2020.

All other revenue, which consists of information services, post-trade services and other revenue, increased to $19.3 million, compared to $13.4 million for the third quarter of 2020. The increase in all other revenue was principally due to $3.4 million of regulatory trade reporting revenue generated by Regulatory Reporting Hub, which was acquired from Deutsche Brse Group in November 2020, net new post-trade services contract revenue of $1.1 million, net new data sales of $0.9 million and $0.5 million of revenue due to the weaker U.S. dollar to U.K. pound sterling exchange rate.

Total expenses for the third quarter of 2021 increased 15.6% to $88.1 million, compared to $76.2 million for the third quarter of 2020. The increase in total expenses was largely due to higher depreciation and amortization of $4.9 million, which includes acquired intangibles expense of $3.2 million; higher professional and consulting fees of $2.6 million, mainly attributable to non-recurring integration costs associated with the Regulatory Reporting Hub transaction of $1.1 million and IT consulting fees of $0.9 million; and higher technology and communication costs of $2.2 million which was partially offset by a decrease in clearing costs of $1.6 million. Expenses in the third quarter of 2021 reflect operating expenses and costs associated with the MuniBrokers and Regulatory Reporting Hub businesses totaling $5.5 million. Excluding the MuniBrokers and Regulatory Reporting Hub expenses, total expenses for the quarter were up 8.4%.

The effective tax rate for the third quarter of 2021 was 22.2%, compared to 23.0% for the third quarter of 2020. The income tax provision for the third quarter of 2021 and 2020 reflected $1.7 million and $5.9 million, respectively, of excess tax benefits related to share-based compensation awards.

Employee headcount was 671 as of September 30, 2021 compared to 599 as of September 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 November 17, 2021 to stockholders of record as of the close of business on November 3, 2021.

Share Repurchases

A total of 9,189 shares were repurchased in the third quarter of 2021 at a cost of $4.2 million.

Balance Sheet Data

As of September 30, 2021, total assets were $1.6 billion and included $468.5 million in cash, cash equivalents and investments. Total stockholders equity as of September 30, 2021 was $1.1 billion.

Updated Expense Guidance for 2021

The Company is updating its full year 2021 expense guidance range to $360.0 million to $365.0 million, down from a range of $370.0 million to $386.0 million. The updated expense guidance range reflects, among other items, lower incentive compensation and variable clearing costs.

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 andChristopher Gerosa, Chief Financial Officer, will host a conference call to discuss the Companys financial results and outlook on Wednesday, October 20, 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: 9890509 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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (In thousands, except per share data) (unaudited) Revenues Commissions $ 142,826 $ 150,586 $ 475,095 $ 478,632 Information 9,608 8,501 28,614 25,570 servicesPost-trade 9,444 4,689 29,553 12,896 servicesOther 215 230 629 681 Total revenues 162,093 164,006 533,891 517,779 Expenses Employeecompensation and 40,878 37,583 129,698 120,413 benefitsDepreciation and 13,964 9,032 38,840 25,404 amortizationTechnology and 10,665 8,417 31,245 25,170 communicationsProfessional and 10,847 8,269 31,191 22,009 consulting feesOccupancy 3,265 3,445 9,882 10,205 Marketing and 1,821 1,148 6,153 5,633 advertisingClearing costs 3,269 4,838 12,335 16,061 General and 3,381 3,467 9,893 9,853 administrativeTotal expenses 88,090 76,199 269,237 234,748 Operating income 74,003 87,807 264,654 283,031 Other income (expense)Investment income 108 344 322 2,327 Interest expense (314 ) (1,046 ) (676 ) (1,046 )Other, net 697 860 (1,952 ) (242 )Total other 491 158 (2,306 ) 1,039 income (expense)Income before 74,494 87,965 262,348 284,070 income taxesProvision for 16,536 20,189 56,645 57,624 income taxesNet income $ 57,958 $ 67,776 $ 205,703 $ 226,446 Per Share Data: Net income per common shareBasic $ 1.54 $ 1.81 $ 5.49 $ 6.06 Diluted $ 1.52 $ 1.78 $ 5.40 $ 5.94 Cash dividendsdeclared per $ 0.66 $ 0.60 $ 1.98 $ 1.80 common share Weighted-average common shares:Basic 37,529 37,386 37,502 37,343 Diluted 38,084 38,160 38,114 38,129

MarketAxess Holdings Inc. Commission Revenue Details Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Total Commissions Revenue (In thousands) (unaudited) Transaction FeesU.S. $ 45,848 $ 60,861 $ 167,617 $ 194,039 high-gradeOther credit ^ 62,475 59,131 208,448 191,718 1Total credit 108,323 119,992 376,065 385,757 Rates ^2 3,825 3,191 11,580 12,623 Totaltransaction 112,148 123,183 387,645 398,380 fees Distribution FeesU.S. 22,257 20,760 64,600 60,369 high-gradeOther credit^1 8,352 6,586 22,651 19,573 Total credit 30,609 27,346 87,251 79,942 Rates^2 69 57 199 310 Totaldistribution 30,678 27,403 87,450 80,252 feesTotal $ 142,826 $ 150,586 $ 475,095 $ 478,632 commissions Average Variable Transaction Fee Per Million (unaudited) U.S.high-grade - $ 169.13 $ 204.24 $ 178.44 $ 190.68 fixed-rateU.S.high-grade - 44.58 47.75 42.11 50.60 floating-rateTotal U.S. 165.02 199.39 173.64 184.83 high-gradeOther credit ^ 195.72 208.27 197.56 203.75 1Total credit 181.43 203.67 186.14 193.78 Rates^2 4.11 4.19 3.94 3.99 ^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 September December 31, 30, 2021 2020 (In thousands) (unaudited) Assets Cash and cash equivalents $ 432,715 $ 460,858 Cash segregated under federal regulations 50,134 50,059 Investments, at fair value 35,767 28,111 Accounts receivable, net 67,766 79,577 Receivables from broker-dealers, clearing 551,841 279,915 organizations and customersGoodwill 154,789 147,388 Intangible assets, net of accumulated 119,797 95,354 amortizationFurniture, equipment, leasehold improvementsand capitalized 95,575 85,204 software, netOperating lease right-of-use assets 72,586 75,924 Prepaid expenses and other assets 30,948 29,039 Total assets $ 1,611,918 $ 1,331,429 Liabilities and stockholders' equity Liabilities Accrued employee compensation $ 49,046 $ 62,326 Payables to broker-dealers, clearing 303,439 133,326 organizations and customersIncome and other tax liabilities 44,871 42,750 Accounts payable, accrued expenses and other 69,300 44,354 liabilitiesOperating lease liabilities 89,963 93,612 Total liabilities 556,619 376,368 Stockholders' equity Common stock 123 123 Additional paid-in capital 323,631 329,742 Treasury stock (187,715 ) (169,523 )Retained earnings 929,853 799,369 Accumulated other comprehensive loss (10,593 ) (4,650 )Total stockholders' equity 1,055,299 955,061 Total liabilities and stockholders' equity $ 1,611,918 $ 1,331,429

MarketAxess Holdings Inc. Reconciliation of Non-GAAP Financial Measures Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Earnings Before Interest, Taxes, Depreciation and Amortization (In thousands) (unaudited) Net income $ 57,958 $ 67,776 $ 205,703 $ 226,446 Add back: Interest expense 314 1,046 676 1,046 Provision for income 16,536 20,189 56,645 57,624 taxesDepreciation and 13,964 9,032 38,840 25,404 amortizationEarnings before interest,taxes, depreciation and $ 88,772 $ 98,043 $ 301,864 $ 310,520 amortization Free Cash Flow (In thousands) (unaudited) Cash flows from operating $ 62,813 $ (48,353 ) $ 136,380 $ 176,869 activitiesExclude: Net change in ? 638 5,569 (62,636 )trading investmentsExclude: Net change infail-to-deliver/receivefrom broker-dealers, 55,195 164,797 121,969 164,797 clearing organizationsand customersLess: Purchases offurniture, equipment and (4,758 ) (3,758 ) (14,567 ) (13,022 )leasehold improvementsLess: Capitalization ofsoftware development (8,191 ) (8,121 ) (24,650 ) (21,124 )costsFree cash flow $ 105,059 $ 105,203 $ 224,701 $ 244,884

MarketAxess Holdings Inc. Volume Statistics* Three Months Ended Nine Months Ended September30, September 30, 2021 2020 2021 2020 Total Trading Volume (In millions) (unaudited) U.S.high-grade - $ 268,671 $ 295,781 $ 931,345 $ 1,005,975 fixed-rateU.S.high-grade - 9,166 9,450 33,946 43,830 floating-rateTotal U.S. 277,837 305,231 965,291 1,049,805 high-gradeOther credit 319,209 283,920 1,055,092 940,939 Total credit 597,046 589,151 2,020,383 1,990,744 Rates 929,734 760,676 2,938,869 3,161,148 Average Daily Volume (In millions) (unaudited) U.S. $ 4,341 $ 4,770 $ 5,135 $ 5,555 high-gradeOther credit 4,970 4,421 5,605 4,972 Total credit 9,311 9,191 10,740 10,527 Rates 14,525 11,885 15,632 16,726 Number of U.S.Trading Days^ 64 64 188 189 1Number of U.K.Trading Days^ 65 65 189 190 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.