4Q & FY 2024 Earnings Conference Call February 6, 2025 Strategic Update ❖Chris Concannon, CEO 2 Strategic update: solid financial performance in FY 2024¹ | | • Strongest annual revenue growth since 20202 | | | --- | --- | --- | | FINANCIAL | • | Record total ADV, record commission revenue2 , record services2,3 revenue | | | • | 9% growth in revenue to a record $817.1 million | | PERFORMANCE | • | 6% growth in diluted earnings per share to $7.28 | | | • | $328 million in TTM free cash flow4 generation | | | ...

Core Viewpoint - MarketAxess reported quarterly earnings of $1.73 per share, exceeding the Zacks Consensus Estimate of $1.70 per share, but down from $1.84 per share a year ago, indicating a 6% year-over-year decline in earnings [1][2] Financial Performance - The company posted revenues of $202.4 million for the quarter ended December 2024, which missed the Zacks Consensus Estimate by 0.47% and represents a 2.4% increase from $197.25 million in the same quarter last year [2] - Over the last four quarters, MarketAxess has surpassed consensus EPS estimates four times, but has only topped consensus revenue estimates once [2] Stock Performance - MarketAxess shares have declined approximately 12.4% since the beginning of the year, contrasting with the S&P 500's gain of 3.1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.03 on revenues of $226.03 million, and for the current fiscal year, it is $8.05 on revenues of $901.73 million [7] - The trend of estimate revisions for MarketAxess is mixed, which could change following the recent earnings report [6] Industry Context - The Securities and Exchanges industry, to which MarketAxess belongs, is currently ranked in the bottom 31% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of MarketAxess may be influenced by the overall outlook for the industry [8]

Financial Performance - Record full year revenue of $817 million, up 9% from the previous year[1] - Total revenues for Q4 2024 were $202.4 million, with a 3% year-over-year increase[6] - Total revenues for the year ended December 31, 2024, were $817.1 million, a 9% increase from $752.5 million in 2023[36] - Net income for the year ended December 31, 2024, was $274.2 million, reflecting a 6% increase from $258.1 million in 2023[36] - Total commission revenue for Q4 2024 was $174,766,000, a 2% increase from $171,891,000 in Q4 2023, and for the year ended December 31, 2024, it reached $711,710,000, up 7% from $662,964,000 in 2023[37] - Net income for Q4 2024 was $65,139,000, a decrease of 6% from $69,627,000 in Q4 2023, while net income margin was 32.2%[41] - EBITDA for Q4 2024 was $96,734,000, down from $98,704,000 in Q4 2023, resulting in an EBITDA margin of 47.8%[41] - Free cash flow for Q4 2024 was $113,367,000, an increase from $94,888,000 in Q4 2023[41] Revenue Sources - Commission revenue from emerging markets and Eurobonds grew by 15%, reflecting strong geographic diversification[6] - Record rates commission revenue increased by 53% in Q4 2024[6] - U.S. high-grade commission revenue grew by 9%, offsetting a 17% decline in U.S. high-yield commission revenue[6] - The Company reported a 41% increase in technology services revenue for the fourth quarter of 2024 compared to the same period in 2023[36] Market and Trading Activity - Emerging markets ADV increased by 18% year-over-year, reaching $3.5 billion[14] - Total rates ADV reached a record $27.1 billion, up 64% compared to the prior year[15] - Total trading volume for Q4 2024 was $2,549,919,000, a 39% increase from $1,839,657,000 in Q4 2023, with an average daily volume (ADV) of $41,030,000[38] - U.S. government bonds trading volume increased by 61% to $1,608,995,000 in Q4 2024, compared to $998,542,000 in Q4 2023[38] Financial Position - As of December 31, 2024, the Company had $698.6 million in cash and equivalents, an increase from $602.5 million as of September 30, 2024, and $575.7 million as of December 31, 2023[25] - Total assets as of December 31, 2024, were $1,789,216,000, down from $2,015,067,000 as of December 31, 2023[40] - Total liabilities decreased to $400,556,000 as of December 31, 2024, from $722,104,000 in the previous year[40] - Stockholders' equity increased to $1,388,660,000 as of December 31, 2024, compared to $1,292,963,000 as of December 31, 2023[40] Future Outlook - Services revenue is expected to grow in the mid-single digits percentage for the full year 2025[25] - Total expenses for 2025 are expected to be in the range of $505.0 million to $525.0 million, indicating an approximate 8% increase based on the midpoint of the guidance[25] - The effective tax rate for 2025 is projected to be between 23.5% and 24.5%[25] - Capital expenditures to support new protocols and product enhancements are expected to be in the range of $65.0 million to $70.0 million[25] Shareholder Returns - The Company declared a quarterly cash dividend of $0.76 per share, payable on March 5, 2025[25] - For the full year 2024, the Company repurchased a total of 341,477 shares at a cost of $75.0 million, with $220.0 million remaining under the Board's authorization as of January 31, 2025[25] Employee Metrics - Employee headcount increased to 891 as of December 31, 2024, up from 881 a year earlier[24] Pricing Metrics - Average variable transaction fee per million for credit decreased by 4% to $149.59 in Q4 2024, and for the year, it decreased by 5% to $150.26[37]

Core Viewpoint - MarketAxess (MKTX) is expected to report a quarterly earnings per share (EPS) of $1.70, reflecting a year-over-year decline of 7.6%, while revenues are anticipated to reach $203.35 million, indicating a 3.1% increase compared to the previous year [1]. Earnings Projections - The consensus EPS estimate has been revised 3.6% lower over the last 30 days, indicating a reevaluation by analysts [2]. - Changes in earnings projections are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate trends and short-term stock price movements [3]. Revenue Estimates - The consensus estimate for 'Revenues- Commissions' is $176.68 million, reflecting a 2.8% increase from the prior year [5]. - 'Revenues- Post-trade services' are forecasted to reach $10.99 million, showing a year-over-year change of 0.4% [5]. - 'Revenues- Information services' are expected to be $13.05 million, indicating a 9.5% increase from the previous year [5]. Commission Revenue and Transaction Fees - Total commission revenue from variable transaction fees is estimated at $148.05 million, representing an 8.1% increase from the prior year [6]. - The 'Average Variable Transaction Fee Per Million - Credit' is projected to be $149.91, down from $156.28 reported in the same quarter last year [6]. Average Daily Volume Estimates - The 'Average Daily Volume - Total' is expected to reach $39.18 billion, up from $29.64 billion a year ago [7]. - The consensus for 'Average Daily Volume - Total credit trading' is $14.15 billion, compared to $13.11 billion in the same quarter last year [7]. - 'Average Daily Volume - Total rates trading' is projected at $25.02 billion, an increase from $16.53 billion year-over-year [8]. Emerging Markets and High-Grade Trading - The 'Average Daily Volume - Total credit trading - Emerging markets' is estimated at $3.47 billion, up from $2.93 billion in the same quarter last year [9]. - For 'Average Daily Volume - Total credit trading - High-grade', the estimate is $6.75 billion, compared to $6.22 billion reported in the same quarter last year [9]. - The 'Average Daily Volume - Total credit trading - Eurobonds' is projected to be $1.97 billion, up from $1.77 billion in the same quarter last year [10]. Stock Performance - MarketAxess shares have decreased by 0.9% over the past month, contrasting with the Zacks S&P 500 composite's increase of 1.7% [11]. - The company holds a Zacks Rank of 3 (Hold), suggesting it is expected to closely follow overall market performance in the near term [11].

Core Viewpoint - MarketAxess Holdings Inc. is expected to report its fourth-quarter 2024 results on February 6, 2025, with earnings estimated at $1.70 per share and revenues at $203.35 million, reflecting a year-over-year revenue growth of 3.1% despite a projected earnings decline of 7.6% [1][2]. Financial Estimates - The Zacks Consensus Estimate for MarketAxess' total revenues for 2024 is $818 million, indicating an 8.7% year-over-year increase, while the earnings per share estimate is $7.25, suggesting a growth of approximately 5.8% year-over-year [3]. - The consensus estimate for commissions in Q4 is $176.7 million, representing nearly 3% growth from the prior-year quarter, and information services revenues are expected to reach $13.1 million, implying a 9.5% rise from the previous year [10]. Trading Volume Insights - Higher trading volumes and market share gains across credit product lines are anticipated to boost credit commission revenues, with total trading volume expected to increase by 33.3% year-over-year [7]. - Eurobonds trading volumes are projected to grow by 14.6% year-over-year, while U.S. high-grade trading volume is expected to see a 14.7% increase, with some estimates suggesting a 17% rise [9]. Expense Projections - Total expenses for the fourth quarter are expected to rise to around $126 million, reflecting an increase of nearly 5% year-over-year, driven by higher employee compensation and technology costs [12]. Earnings Prediction Model - The current model does not predict a definitive earnings beat for MarketAxess, as it has an Earnings ESP of -0.75% and a Zacks Rank of 3, indicating uncertainty regarding earnings performance [5].

Core Viewpoint - MarketAxess (MKTX) is expected to report a year-over-year decline in earnings despite higher revenues, with the actual results being crucial for near-term stock price movements [1][2]. Earnings Expectations - The upcoming earnings report is anticipated on February 6, 2025, with a consensus EPS estimate of $1.70, reflecting a -7.6% change year-over-year. Revenues are projected at $203.35 million, indicating a 3.1% increase from the previous year [3][2]. Estimate Revisions - The consensus EPS estimate has been revised down by 3.63% over the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [4][10]. Earnings Surprise Prediction - The Most Accurate Estimate for MarketAxess is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -0.75%. The stock currently holds a Zacks Rank of 3, complicating predictions of an earnings beat [10][11]. Historical Performance - MarketAxess has a history of beating consensus EPS estimates, having done so in the last four quarters. In the most recent quarter, it reported earnings of $1.90 per share against an expectation of $1.82, achieving a surprise of +4.40% [12][13]. Conclusion - While MarketAxess does not appear to be a strong candidate for an earnings beat, investors should consider other factors influencing stock performance ahead of the earnings release [16].

Performance Overview - MarketAxess Holdings Inc. (MKTX) shares have declined by 20.4% over the past three months, significantly underperforming the industry, which saw a decline of 3% [1] - In comparison, CME Group Inc. (CME) experienced a gain of 2.5%, while Cboe Global Markets, Inc. (CBOE) fell by 7.4% during the same period [1] - The S&P 500 index rose by 3%, indicating a stark divergence in performance [1] - MKTX is currently trading below its 50-day and 200-day moving averages, suggesting downward momentum [1] Key Challenges - MKTX reported growth in total credit average daily trading volume for Q4 2024, but this was offset by significant declines in key segments [5] - U.S. high-yield trading activity fell by 18.7% year over year in Q4 2024, with a market share drop of 380 basis points [5] - U.S. high-grade trading activity increased by 4% year over year, but its market share decreased by 250 basis points [5] - A shift towards large block trading may be contributing to the decline in market share [5] - Transaction fees per million for total credit fell by 3.8% year over year in Q4 2024 due to product mix, despite higher trading volumes in certain areas [6] Financial Performance - Total expenses for MKTX rose by 8.2%, 11.8%, and 11.5% year over year in 2022, 2023, and the first nine months of 2024, respectively [6] - Management expects 2024 expenses, including the Pragma acquisition, to be near the low end of the previously provided range of $480 million to $500 million [7] Valuation Insights - MKTX appears relatively expensive from a valuation perspective, which may limit short-term gains [8] - The company's shares are trading at a forward price/earnings ratio of 26.62X, higher than the industry average of 22.4X [8] - Other industry players like CME Group and Cboe Global Markets are priced at 21.85X and 20.81X price/earnings, respectively [9] Growth Drivers - MKTX has consistently benefited from solid trading volumes, which are the primary driver of its revenues [10] - In the first nine months of 2024, commissions advanced by 9% year over year, supported by an average daily trading volume of $35.8 billion [10] - The company leverages acquisitions and partnerships to enhance its product portfolio and expand its footprint in fixed-income trading [11] - A strategic data partnership with S&P Global Market Intelligence was established in October 2024 to increase transparency and efficiency in fixed-income markets [11] - MKTX's Open Trading platform contributed to a credit volume of $782.2 billion, improving by 10.7% from the prior-year period [12] - As of September 30, 2024, MKTX had cash and cash equivalents of $446.3 million and generated $209 million in net cash from operations, an increase of 8.8% from the prior-year period [13] Earnings Estimates - The Zacks Consensus Estimate for MKTX's 2024 earnings is $7.38 per share, indicating growth of 7.7% from the prior-year figure [15] - The consensus estimate for 2025 earnings is $8.21 per share [15] - MKTX's earnings have outpaced estimates in the trailing four quarters, with an average surprise of 4.2% [16] Conclusion - Despite facing short-term challenges such as declining market share, falling transaction fees, and rising expenses, MKTX's robust trading volumes, strategic partnerships, and strong financial position highlight its potential for long-term growth [17] - However, the company's higher valuation compared to the industry average suggests it may not be an opportune time to buy the stock [17]

MarketAxess Holdings Inc. (MKTX) announced impressive growth in its trading volumes for the fourth quarter of 2024 and December. The total credit average daily trading volume (ADV) reached nearly $13.9 billion, marking a year-over-year increase of more than 6%. This growth was driven by notable gains across various segments, including a 4% rise in U.S. high-grade ADV, an 18% boost in emerging markets ADV and 13% growth in Eurobonds ADV. Total ADV rose 38% to $41 billion in the December quarter.One of the st ...

MarketAxess Holdings Inc. (MKTX) benefits from solid trading volumes, acquisitions and collaborations, a well-established Open Trading platform and robust cash-generating abilities.   MKTX’s Zacks Rank & Price PerformanceMarketAxess carries a Zacks Rank #2 (Buy) at present. The stock has gained 20.6% in the past year.Image Source: Zacks Investment ResearchRobust Growth Prospects of MarketAxessThe Zacks Consensus Estimate for MarketAxess’ 2024 earnings is pegged at $7.37 per share, indicating a year-over-yea ...

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