MarketAxess (MKTX) Q4 2025 Earnings Transcript

Core Insights - The company returned a total of $474 million to investors through share repurchases and dividends, with a new capital return plan of $400 million announced, including a $300 million accelerated share repurchase (ASR) [1][22] - Record total revenue of $846 million was achieved in 2025, driven by significant growth in trading volumes and new initiatives, with a notable 29% increase in block trading average daily dollar volume (ADD) [2][3][10] - The company is focused on enhancing its technology and product roadmap to achieve its three-year targets, with a strong emphasis on execution in 2026 [3][26] Financial Performance - The company generated record free cash flow of $347 million in 2025, with total revenue outside of US credit growing by 10% while US credit revenue decreased by 2% [2][24] - Total commissions revenue increased by 4% to $181 million, with notable growth in US high yield and emerging markets [17][20] - Operating expenses increased by 8%, driven by higher consulting, technology, and employee compensation costs [21] Trading and Market Dynamics - Block trading in US credit, emerging markets, and Eurobonds now constitutes about one-third of total credit ADV, with significant growth observed in January 2026 [9][10] - The company reported a 33% increase in dealer-initiated ADV for the year, with a record $7 billion in total MIDEX trading volume [11] - Emerging markets showed strong growth, with a 50% year-over-year increase in January trading volume, indicating a substantial opportunity for further penetration [5][50] Strategic Initiatives - The company is enhancing its product offerings across multiple channels, including portfolio trading, block trading, and automation protocols, to capture market share and drive revenue growth [4][8][10] - The introduction of new trading solutions, such as the closing auction protocol, is aimed at increasing participation and liquidity in the market [72] - Investments in AI and data analytics are expected to enhance trading efficiency and client engagement, leveraging proprietary data for improved market insights [76][79] Future Outlook - The company anticipates mid-single-digit growth in total services revenue for 2026, with a focus on maintaining expense discipline while investing in technology and talent [24][25] - The effective tax rate is expected to be in the range of 24% to 26%, with capital expenditures projected between $65 million and $75 million [25] - The company remains confident in its ability to return to higher levels of revenue growth in US credit, supported by its three-year financial targets [26]