MarketAxess(MKTX) - 2025 Q2 - Quarterly Results

Financial and Operational Highlights MarketAxess's Q2 2025 performance saw record revenue and EPS growth, driven by strong trading channel expansion Q2 2025 Financial and Operational Performance MarketAxess achieved record Q2 2025 revenue of $219.5 million and strong EPS growth, fueled by significant increases in portfolio, block, and dealer-initiated trading Q2 2025 Select Financial Results ($ in millions, except per share data) | | 2Q 2025 | 2Q 2024 | % Change YoY | | :--- | :--- | :--- | :--- | | GAAP-basis | | | | | Revenues | $219 | $198 | 11% | | Expenses | $128 | $116 | 10% | | Net Income | $71 | $65 | 10% | | Diluted EPS | $1.91 | $1.72 | 11% | | Non-GAAP (ex-notable items) | | | | | Expenses | $124 | $116 | 6% | | Net Income | $74 | $65 | 15% | | Diluted EPS | $2.00 | $1.72 | 16% | | Other Non-GAAP | | | | | EBITDA | $111 | $99 | 12% | | EBITDA Margin | 50.5% | 50.0% | +50 bps | - Total revenues increased 11% to a record $219.5 million, driven by a 12% rise in total commission revenue and a 7% increase in services revenue[8] - The company achieved strong growth across its strategic channels: - Client-Initiated: Record ADV in U.S. credit block trading (+37%) - Portfolio Trading: 69% increase in total portfolio trading ADV to a record $1.5 billion - Dealer-Initiated: ADV increased 40% to $1.8 billion[8] CEO Commentary The CEO emphasized progress in client engagement and X-Pro platform adoption, outlining future growth strategies including targeted block trading and the new Mid-X solution - In Q2, the company made significant strides in enhancing its client franchise, increasing client engagement with X-Pro, and delivering on new initiatives across client-initiated, portfolio trading, and dealer-initiated channels[4] - Future strategic focus for the latter half of 2025 includes growing the targeted block trading solution, enhancing the portfolio trading solution, and launching the new Mid-X solution for the dealer-initiated channel[5] - Recent strategic hires in key roles are expected to enhance the company's ability to drive growth in 2025 and beyond[5][6] Detailed Financial Analysis Revenue growth was driven by increased commission and services revenue, while expenses rose due to operational costs and notable items Revenue Analysis Total revenue growth stemmed from a 12% increase in commission revenue and a 7% rise in services revenue, with strong trading volumes offsetting lower fees per million Commission Revenue Record total commission revenue of $191.8 million was driven by increased credit and rates ADV, despite declines in fees per million, with RFQ-Hub contributing to other commissions Q2 2025 Average Variable Transaction Fee Per Million (FPM) | Category | 2Q25 FPM | 2Q24 FPM | % Change YoY | | :--- | :--- | :--- | :--- | | Total Credit | $138 | $148 | (7)% | | Total Rates | $4.03 | $4.45 | (9)% | - Record total credit commission revenue of $176.6 million was up 10%, driven by a 22% increase in total credit ADV, which was partially offset by a 7% decrease in total credit FPM due to protocol mix[12] - Record total rates commission revenue of $8.1 million increased 40%, driven by a 58% increase in total rates ADV, partially offset by a 9% decrease in FPM due to product mix[13] - Other commission revenue increased 39% to a record $7.1 million, primarily due to the inclusion of approximately $1.8 million from the newly acquired RFQ-Hub[14] Services Revenue Services revenue grew 7% to a record $27.7 million, with increases across information, post-trade, and technology services, the latter boosted by the RFQ-hub acquisition - Information services revenue increased 4% to $13.1 million, driven by foreign currency fluctuations and net new data contract revenue[16] - Post-trade services revenue grew 7% to $11.1 million, mainly due to foreign currency fluctuations and new contract revenue[17] - Technology services revenue rose 16% to $3.5 million, driven by higher license and connectivity fees from the recently acquired RFQ-hub[18] Expense Analysis Total expenses increased 10% to $127.6 million, with a 6% rise excluding notable items like repositioning and acquisition-related charges - Total expenses increased 10% to $127.6 million. Excluding notable items, expenses were $123.6 million, an increase of 6%[19] - Notable items in Q2 2025 totaled $4.6 million pre-tax, consisting of $4.0 million in repositioning charges (mainly severance) and a $0.6 million acquisition-related charge[9][10] Non-Operating Items and Tax Rate Other income increased to $5.6 million due to foreign exchange gains, while the effective tax rate rose to 26.9% reflecting an uncertain tax position reserve - Other income increased to $5.6 million from $5.0 million in the prior year, driven by foreign exchange gains[21] - The effective tax rate rose to 26.9% from 24.8% in the prior year, due to an increase in accruals for the uncertain tax position reserve established in Q1 2025[21] Capital Management and Other Information The company maintains a strong capital position with $620.9 million in cash and investments, no debt, and continued shareholder returns through buybacks and dividends Capital Position and Shareholder Returns The company reported $620.9 million in cash and investments with no debt, repurchased $80.0 million in shares, and declared a $0.76 per share quarterly dividend - The company held $620.9 million in cash, cash equivalents, and investments as of June 30, 2025, with no outstanding borrowings under its credit facility[21] - Year-to-date through July 2025, the company repurchased 379,667 shares for $80.0 million. $145.0 million remains under the share repurchase authorization[21] - A quarterly cash dividend of $0.76 per share was declared, payable on September 3, 2025[21] Other Corporate Information Employee headcount increased to 881 as of June 30, 2025, reflecting a slight rise from the prior year - Employee headcount was 881 as of June 30, 2025, up from 864 as of June 30, 2024[21] Consolidated Financial Statements This section presents the company's core financial statements, including detailed income statements, commission revenue, trading volumes, and balance sheet data Consolidated Statements of Operations (Table 2) This table presents the company's detailed income statement for the three and six months ended June 30, 2025, compared to the same periods in 2024, breaking down revenues, expenses, and net income Consolidated Statements of Operations (Three Months Ended June 30, in thousands) | | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $219,462 | $197,660 | 11% | | Commissions | $191,770 | $171,679 | 12% | | Information services | $13,087 | $12,544 | 4% | | Post-trade services | $11,076 | $10,400 | 7% | | Technology services | $3,529 | $3,037 | 16% | | Total expenses | $127,598 | $116,321 | 10% | | Operating income | $91,864 | $81,339 | 13% | | Income before income taxes | $97,416 | $86,337 | 13% | | Provision for income taxes | $26,236 | $21,399 | 23% | | Net income | $71,180 | $64,938 | 10% | | Diluted EPS | $1.91 | $1.72 | | Commission Revenue Detail (Table 3) This table provides a detailed breakdown of commission revenue into variable transaction fees and fixed distribution fees for credit and rates products, including average variable transaction fee per million (FPM) Commission Revenue Detail (Three Months Ended June 30, in thousands) | | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Total variable transaction fees | $158,073 | $138,440 | 14% | | Credit | $142,977 | $127,645 | 12% | | Rates | $8,035 | $5,719 | 40% | | Total fixed distribution fees | $33,697 | $33,239 | 1% | | Total commission revenue | $191,770 | $171,679 | 12% | Trading Volume Detail (Table 4) This table details trading volumes and average daily volume (ADV) across various credit and rates products for the three months ended June 30, 2025, with year-over-year comparisons Trading Volume (ADV, in millions for Three Months Ended June 30) | | 2025 ADV | 2024 ADV | % Change | | :--- | :--- | :--- | :--- | | Total credit trading | $16,795 | $13,743 | 22% | | High-grade | $7,760 | $6,436 | 21% | | High-yield | $1,692 | $1,337 | 27% | | Emerging markets | $4,018 | $3,337 | 20% | | Eurobonds | $2,681 | $2,103 | 27% | | Total rates trading | $32,214 | $20,426 | 58% | | U.S. government bonds | $30,756 | $19,634 | 57% | | Total trading | $49,009 | $34,169 | 43% | Consolidated Condensed Balance Sheet (Table 5) This table shows the company's financial position as of June 30, 2025, compared to December 31, 2024, detailing assets, liabilities, and stockholders' equity Consolidated Condensed Balance Sheet Data (in thousands) | | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $462,837 | $544,478 | | Investments, at fair value | $169,349 | $165,260 | | Total assets | $1,974,938 | $1,789,216 | | Liabilities and Stockholders' Equity | | | | Total liabilities | $574,038 | $400,556 | | Total stockholders' equity | $1,386,185 | $1,388,660 | | Total liabilities and stockholders' equity | $1,974,938 | $1,789,216 | Non-GAAP Financial Measures and Reconciliations This section explains the company's use of non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents Explanation of Non-GAAP Measures The company uses non-GAAP measures like EBITDA, EBITDA margin, and free cash flow to supplement GAAP financials, offering additional insights into operating performance - The company utilizes non-GAAP financial measures, including EBITDA, EBITDA margin, free cash flow, and results excluding notable items, to provide additional information to investors and management for analyzing and evaluating business performance[22] Reconciliation of Notable Items (Table 6) This table reconciles GAAP to non-GAAP figures for total expenses, other income, net income, and diluted EPS by excluding notable items such as repositioning and acquisition-related charges Reconciliation of GAAP to Non-GAAP Results (Q2 2025, in thousands) | | GAAP-basis | Notable Items | Non-GAAP basis | | :--- | :--- | :--- | :--- | | Total Expenses | $127,598 | $(3,970) | $123,628 | | Other income (expense) | $5,552 | $557 | $6,109 | | Net income | $71,180 | $3,309 | $74,489 | | Diluted EPS | $1.91 | $0.09 | $2.00 | Reconciliation of Net Income to EBITDA (Table 7) This table reconciles GAAP Net Income to the non-GAAP measure of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and calculates the corresponding margins Reconciliation to EBITDA (Q2 2025 vs Q2 2024, in thousands) | | 2Q 2025 | 2Q 2024 | | :--- | :--- | :--- | | Net income | $71,180 | $64,938 | | Interest income | $(5,930) | $(6,401) | | Interest expense | $139 | $621 | | Provision for income taxes | $26,236 | $21,399 | | Depreciation and amortization | $19,195 | $18,356 | | EBITDA | $110,820 | $98,913 | | EBITDA Margin | 50.5% | 50.0% | Reconciliation to Free Cash Flow (Table 8) This table reconciles Net Cash Provided by Operating Activities (a GAAP measure) to the non-GAAP measure of Free Cash Flow by adjusting for changes in trading investments, fails, and capital expenditures Reconciliation to Free Cash Flow (Q2 2025 vs Q2 2024, in thousands) | | 2Q 2025 | 2Q 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $103,714 | $118,849 | | Adjustments for trading & fails | $21,987 | $(3,051) | | Less: CapEx & Capitalized Software | $(12,716) | $(18,191) | | Free cash flow | $112,985 | $97,607 |