Summary of MarketAxess Conference Call Company Overview - **Company**: MarketAxess - **Participants**: Chris Concannon (CEO), Ilene Bieler (CFO), Alex Kramm (Managing Director - Equity Research) Key Industry Insights - **Market Focus**: The company is focused on regaining market share in the U.S. credit business, with significant investments in technology made in 2024 aimed at execution in 2025 [5][7] - **Trading Channels**: MarketAxess operates through three main channels: client to dealer, portfolio trading, and dealer to dealer [8][12] - **Market Trends**: Electronic trading is increasing turnover in the market, with portfolio trading contributing significantly to this growth [13][43] Core Business Strategies - **Investment in Technology**: The company has made substantial investments in technology to enhance trading tools and analytics, which are expected to yield results in 2025 [7][10] - **Client to Dealer Channel**: MarketAxess has a dominant RFQ platform for corporate bonds in the U.S., with a focus on improving liquidity for clients [8][9] - **Portfolio Trading**: The company is targeting the block trading market, which represents a significant growth opportunity, as it is largely still conducted via phone and chat [19][20][45] - **Dealer to Dealer Solutions**: A new mid-market solution is expected to launch in Q2, aimed at providing dealers with efficient liquidity options [17][18][32] Financial Performance and Market Share - **Market Share Goals**: The company aims to capture a larger share of the block trading market, which is estimated to be 50% of the total market [19][20] - **Performance Metrics**: The portfolio trading tool has seen over $1 billion in bond blocks traded, indicating strong performance [16] - **Fee Structure**: The company is not currently facing significant price competition in its core offerings, focusing instead on enhancing features and functionality [77][80] Macro Market Conditions - **Market Environment**: The current low volatility and tight spreads are challenging for the business, but the company is well-positioned to benefit from increased volatility and wider spreads [60][61] - **Electronic Trading Growth**: The macro environment is favorable for electronic trading, with attractive yields and a growing fixed income market [41][42] Emerging Markets - **Growth in EM**: MarketAxess is a leading player in the emerging markets (EM) space, with a focus on converting manual trading to electronic trading [54][58] - **Market Share in EM**: The company is experiencing growth in market share in EM, with electronic adoption still under 5% of the total market [59] Automation and Future Outlook - **Automation Trends**: The company is investing in automation, with expectations that 2025 will see significant advancements in this area [48][51] - **Long-term Vision**: The CEO expressed optimism about the future of electronic trading, predicting that as traders become accustomed to electronic platforms, adoption will continue to grow [46][47] Expense Management - **Investment Strategy**: The company has maintained a disciplined approach to investment, focusing on targeted areas that will yield the highest returns [88][89] - **CapEx Plans**: MarketAxess plans to invest $65 million to $70 million in capital expenditures, primarily for software and development [86][91] Conclusion - MarketAxess is strategically positioned to capitalize on growth opportunities in electronic trading, particularly in the block trading and emerging markets. The company is focused on enhancing its technology and trading solutions while managing expenses effectively to drive future growth.

Financial Data and Key Metrics Changes - The company reported a 9% growth in revenue for 2024, marking the strongest annual revenue growth rate since 2020, with record commission and services revenue [8][11] - Total revenue for Q4 2024 was $202 million, compared to $197 million in the prior year, with commission revenue increasing by 2% [35][36] - The effective tax rate was 23%, and diluted earnings per share were reported at $1.73 [38] Business Line Data and Key Metrics Changes - In the credit business, the company generated a record $712 million in commission revenue, with strong growth in emerging markets and Eurobonds [11][39] - The rates business saw trading ADV increase significantly from $2.9 billion per day in Q1 2024 to $11.4 billion in Q4 2024 [13] - Portfolio trading ADV reached over $900 million, with U.S. credit portfolio trading ADV at $800 million and a market share of 16% [33] Market Data and Key Metrics Changes - U.S. credit ADV was up 10% to $8 billion, while international product ADV reached a record $5 billion, up 17% [28] - The company reported record local markets ADV of over $1.4 billion, up 18% [29] - Open Trading ADV was a record $4 billion in 2024, an increase of 8% [31] Company Strategy and Development Direction - The company plans to focus on growing market share across client-initiated, portfolio trading, and dealer-initiated channels in 2025 [10][20] - A new block trading solution was launched in emerging markets and Eurobonds, with plans for a full rollout in U.S. credit by Q2 2025 [10][60] - The company aims to enhance its dealer solutions and expand its automation suite to support global product offerings [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the favorable macro environment for fixed income markets, with positive inflows into fixed income funds [66] - The company acknowledged challenges in U.S. credit market share but emphasized a clear strategy to return to growth [19][75] - Management highlighted the importance of data and analytics in driving client engagement and trading efficiency [88][90] Other Important Information - The company announced the appointment of Roberto Hoornweg to the Board of Directors, effective March 1, 2025 [7] - The balance sheet remains strong, with cash and equivalents totaling $699 million as of December 31, 2024 [42] Q&A Session Summary Question: Why was the block trading launch led with emerging markets and Eurobonds? - Management explained that the decision was based on strong pre-trade analytics and client demand in those markets, with a successful increase in EM block market share [52][54] Question: What gives confidence in growing market share in high grade? - Management cited favorable market conditions, robust new issue markets, and the introduction of multiple trading protocols as key drivers for growth [66][70] Question: What are the key areas for electronification in the market? - Management identified the block market and retail space as significant opportunities for electronification, particularly in emerging markets [84][88] Question: Can you discuss the motivation behind acquiring the rest of RFQ hub? - The acquisition aims to enhance cross-asset trading capabilities and provide clients with access to fixed income ETFs alongside traditional products [146][150] Question: What initiatives are planned for the rates platform? - Management highlighted the launch of algorithmic solutions and a hybrid offering that combines electronic and traditional RFQ solutions as key initiatives for growth in the rates market [161][163]

Core Viewpoint - MarketAxess Holdings Inc. reported mixed financial results for the fourth quarter of 2024, with earnings per share exceeding estimates but total revenues falling short of expectations [1][2]. Financial Performance - Earnings per share for Q4 2024 were $1.73, surpassing the Zacks Consensus Estimate by 1.8%, although this represented a 6% decline year over year [1]. - Total revenues increased by 3% year over year to $202 million, but missed the consensus mark by 0.5% [2]. - Commission revenues reached $174.8 million, a 2% year-over-year growth, but fell short of the Zacks Consensus Estimate of $176.7 million [3]. - Information services revenues improved by 10% year over year to $13.2 million, exceeding the consensus mark of $13.1 million [4]. - Total expenses rose by 2% year over year to $122.4 million, primarily due to increased employee compensation and technology costs, but were below the estimate of $125.8 million [5]. - Operating income increased by 4% year over year to $80 million, although it missed the estimate of $82 million [5]. - EBITDA decreased by 2% year over year to $97 million, with the EBITDA margin declining by 220 basis points to 47.8% [5]. Trading Volumes - High-grade trading volume was $400.1 billion, a 4% increase year over year, but below the consensus estimate of $441.8 billion [6]. - High-yield trading volume fell by 19% year over year, reflecting reduced credit spread volatility [6]. - Other credit trading volume rose by 14% year over year to $38.7 billion, with total credit trading volume growing by 6% to $864.7 billion [7]. Balance Sheet and Cash Flow - As of December 31, 2024, cash and cash equivalents were $544.5 million, a 20.7% increase from the end of 2023 [10]. - Total assets decreased by 11.2% to $1.8 billion, while total stockholders' equity improved by 7.4% to $1.4 billion [10]. - Net cash from operations for Q4 was $176.2 million, a 24.4% year-over-year increase, with free cash flow advancing by 19.5% to $113.4 million [11]. Capital Deployment - MarketAxess repurchased shares worth $16.4 million during the quarter, with a remaining capacity of $220 million under its repurchase program [12]. - The quarterly cash dividend was increased by 2.7% to 76 cents per share, payable on March 5, 2024 [12]. Full Year Update - For the full year 2024, revenues totaled $817.1 million, a 9% increase from 2023, with earnings per share rising by 6.3% to $7.28 [13]. 2025 Outlook - Services revenues are expected to grow in the mid-single digits, with total expenses projected between $505 million and $525 million [14].

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]