MarketAxess Holdings Inc. (MKTX) announced impressive growth in its trading volumes for the first quarter of 2025. The total credit average daily trading volume (ADV) reached nearly $15.9 billion, marking a year-over-year increase of 6%. This growth was driven by notable gains across various segments, including a 9% boost in emerging markets ADV, and 15% growth in Eurobonds ADV. Total ADV rose 31% to $42.9 billion in the March quarter. One of the standout performers was the Municipal bonds segment (42%), wi ...

Core Insights - MarketAxess Holdings Inc. (MKTX) is experiencing growth due to rising commissions, strategic acquisitions, collaborations, and a strong financial position that supports expansion and shareholder returns [1] Financial Performance - MKTX has a Zacks Rank of 3 (Hold) and has gained 12.9% in the past month, outperforming the industry which declined by 4.4% [2] - The Zacks Consensus Estimate for MKTX's 2025 earnings is $7.70 per share, reflecting a year-over-year improvement of 5.8%, with revenues estimated at $876.3 million, indicating a 7.2% increase [3] - For 2026, earnings are projected at $8.63 per share, a 12.1% increase from 2025, with revenues expected to reach $969 million, a 10.6% improvement [4] - MKTX has consistently beaten earnings estimates in the last four quarters, with an average surprise of 2.93% [5] Operational Efficiency - The return on equity for MKTX stands at 20.2%, significantly higher than the industry average of 12%, demonstrating effective utilization of shareholders' funds [7] Market Position and Growth Drivers - MKTX benefits from rising trading volumes, which are a key driver of commission-based revenues, reporting an average daily trading volume of $37.1 billion in 2024, a 19% increase year-over-year [8] - The company has captured significant market share across various products, including U.S. High Grade, U.S. High Yield, Eurobonds, Emerging Markets, and Municipal Bonds [9] - MKTX actively pursues strategic acquisitions and partnerships to enhance its offerings and expand its presence in the fixed-income market [10] - The company serves over 1,000 active clients globally, with ongoing investments in international markets expected to drive sustained revenue growth [11] Financial Strength - MKTX's robust financial position is supported by strong liquidity and operating cash flows, with net cash generated from operations totaling $385.2 million in 2024, a 15.4% increase year-over-year [12]

Core Insights - The article compares The Charles Schwab Corporation (SCHW) and MarketAxess (MKTX) to identify which stock presents a better value opportunity for investors [1] Valuation Metrics - SCHW has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while MKTX has a Zacks Rank of 3 (Hold) [3] - SCHW's forward P/E ratio is 18.66, significantly lower than MKTX's forward P/E of 28.15 [5] - SCHW has a PEG ratio of 0.97, while MKTX's PEG ratio is much higher at 4.99, suggesting SCHW is more reasonably priced relative to its expected earnings growth [5] - SCHW's P/B ratio stands at 3.58, compared to MKTX's P/B of 5.89, further indicating that SCHW is undervalued [6] - Based on these metrics, SCHW holds a Value grade of B, whereas MKTX has a Value grade of F, highlighting SCHW's superior valuation [6] Conclusion - Given the stronger estimate revision activity and more attractive valuation metrics, SCHW is positioned as the superior option for value investors at this time [7]

Market Performance and Trading Volume - In 2024, MarketAxess generated approximately $3.5 trillion in total credit trading volume, up from $2.6 trillion in 2020, with a market share of 19.0% in U.S. high-grade corporate bonds and 13.2% in high-yield corporate bonds[20]. - The average daily volume (ADV) for U.S. high-grade and U.S. high-yield bonds on MarketAxess's platforms was approximately $8.2 billion in 2024, representing 17.7% of the estimated addressable market of $46.2 billion[32]. - In 2024, the company executed approximately $1.0 trillion in credit trading volume using Open Trading, representing 35.0% of total eligible credit trading volume on its platforms[34]. - In 2024, over 60.0% of all credit volume on the MarketAxess platform was executed via the disclosed RFQ protocol[51]. - The ADV for U.S. high-grade bonds increased by 16.9% from 2023 to 2024, reaching $6.8 billion, while U.S. high-yield bonds saw a decrease of 16.3% to $1.3 billion[40]. - In 2024, $64.0 billion in green bond trading volume was executed globally on the platforms[75]. Revenue Sources and Financial Performance - 87.1% of MarketAxess's revenues in 2024 were derived from commissions for transactions executed on its platforms[16]. - The company reported that 87.1% of its revenues in 2024 were derived from transaction commissions, with 6.2% from data products and 5.2% from post-trade services[48]. - Approximately 40.0% of the company's revenues are derived from secondary trading in U.S. high-grade corporate bonds, indicating a reliance on this segment for financial performance[149]. - Revenues from international clients increased from 25.0% of total revenues in 2020 to 30.4% in 2024, with ADV in EMEA, Latin America, and APAC growing from $3.0 billion in 2019 to $4.8 billion in 2024[35]. Technology and Platform Development - The company introduced its new trading platform, MarketAxess X-Pro, in 2024, aimed at improving trading efficiency and integrating proprietary data and pre-trade analytics[13]. - MarketAxess's acquisition of Pragma in 2023 accelerated the development of AI-driven execution algorithms across key product areas, enhancing trading capabilities[13]. - The technology team delivered approximately 1,000 unique new business and technical features to clients in 2024[78]. - Significant upgrades to electronic trading platforms and infrastructure are necessary to accommodate increases in order message volume and trading volume, which require substantial financial and operational resources[179]. Regulatory Environment and Compliance - The company is subject to extensive regulation from various authorities, including the SEC in the U.S. and the FCA in the U.K., which oversee its operations and compliance[90][100]. - Regulatory changes, such as the SEC's proposed rules for fixed-income electronic trading platforms, may require the company to adapt its trading protocols to comply with new regulations[97]. - The central clearing mandate for U.S. Treasury securities transactions is set to take effect on December 31, 2025, impacting participants who do not currently centrally clear trades[98]. - The first stage of the MiFIR Review became effective in 2024, with full effectiveness expected in 2026, introducing significant changes to trading data publication and regulatory requirements[105]. - The company may incur substantial costs related to compliance with new regulations, which could materially affect its financial condition and results of operations[211]. Competition and Market Dynamics - The competitive landscape is intensifying, with competition arising from various market participants, including electronic trading platforms and traditional broker-dealers[81][86]. - The company competes based on client network, liquidity provided by broker-dealer clients, and the unique liquidity offered by its Open Trading protocols[82]. - Future growth may be hindered by intense competition, particularly from larger and more established firms that can offer a wider range of services and lower costs[145]. - The company faces substantial competition and market dynamics that could impact its profitability and growth prospects[128]. Employee and Talent Management - MarketAxess experienced a 1.1% increase in employee count in fiscal year 2024, totaling 891 employees, compared to an 18.4% increase in 2023[120]. - The company is committed to ongoing talent management and succession planning to support future growth and leadership development[122]. - The competitive market for qualified personnel, especially software developers, poses challenges in attracting and retaining skilled employees necessary for business support[205]. Risks and Challenges - The company faces risks related to regulatory changes and compliance costs, which could impact operational flexibility and financial performance[135]. - Loss of major institutional investor clients could significantly reduce trading volume and revenue, as a limited number of clients account for a substantial portion of trading[160]. - The company may experience reduced market liquidity if bank-affiliated broker-dealers decrease trading activity, impacting operating results[158]. - Economic sanctions, such as those imposed during the Russia-Ukraine conflict, could negatively impact financial markets and the company's operations[167]. - Cybersecurity threats and incidents have not materially affected the company in the last three years, but the risk of breaches remains a concern[187]. Acquisitions and Strategic Growth - The company has made acquisitions in the past, including the regulatory reporting business of Deutsche Börse in 2020, MuniBrokers in 2021, and Pragma in 2023, with a controlling stake in RFQ-hub agreed for 2024[199]. - The company routinely evaluates potential acquisition and divestiture candidates, but there is no assurance that transactions will be completed or beneficial[199]. - The company has entered new markets, including algorithmic trading and quantitative execution solutions in equities and foreign exchange, following the acquisition of Pragma in 2023[152].

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]