MarketAxess (NasdaqGS:MKTX) Q3 2025 Earnings Call November 07, 2025 11:00 AM ET Company ParticipantsChris Concannon - CEOChris Allen - Managing DirectorRit Roy - Senior Equity Research AssociatePatrick O’Shaughnessy - Managing DirectorChris O'Brien - Equity Research AVP - Brokers, Exchange, and Asset ManagersIlene Fiszel Bieler - CFOStephen Davidson - Head of Investor RelationsSimon Clinch - Managing Director of Financials ResearchConference Call ParticipantsAlex Kramm - Managing Director and Senior Equity ...

MarketAxess (NasdaqGS:MKTX) Q3 2025 Earnings Call November 07, 2025 11:00 AM ET Company ParticipantsChris Concannon - CEOChris Allen - Managing DirectorRit Roy - Senior Equity Research AssociatePatrick O’Shaughnessy - Managing DirectorChris O'Brien - Equity Research AVP - Brokers, Exchange, and Asset ManagersIlene Fiszel Bieler - CFOStephen Davidson - Head of Investor RelationsSimon Clinch - Managing Director of Financials ResearchConference Call ParticipantsAlex Kramm - Managing Director and Senior Equity ...

Financial Data and Key Metrics Changes - Revenue for the third quarter was $209 million, reflecting a slight increase from the prior year, with a 1% growth overall [16] - Total commission revenue remained flat compared to the prior year, while services revenue increased by 9% to a record $29 million [16][17] - The effective tax rate rose to 27.1%, up from 23% in the prior year, due to increased accrual for uncertain tax positions [17] Business Line Data and Key Metrics Changes - U.S. credit commission revenue decreased by 2% to $165 million, with strong growth in emerging markets (11%) and Eurobonds (9%) offsetting declines in U.S. high-grade (9%) and flat growth in U.S. high-yield [18] - Block trading ADV across U.S. credit, emerging markets, and Eurobonds increased by 23% year-to-date, with cumulative block trading volume reaching approximately $12 billion [11] - Portfolio trading ADV year-to-date is running 50% above the prior year, with U.S. credit portfolio trading market share over 18%, up 210 basis points [11] Market Data and Key Metrics Changes - 36% of global credit trading volume is now driven by clients outside of North America, up from 29% in 2020 [9] - In October, U.S. high-yield ADV growth was strong at 9%, despite a tough comparison to the prior year due to heightened activity before the U.S. presidential election [8] - The average size of non-block trades is decreasing, while the average block size is increasing, with blocks greater than or equal to $5 million representing approximately 45% of trade volume in U.S. high-grade [12] Company Strategy and Development Direction - The company is focused on providing a protocol-agnostic platform that utilizes data and analytics to assist clients in choosing the appropriate trading protocol [4][5] - Investments are being made in technology transformation, portfolio trading, dealer-to-dealer business, and automation tools to enhance competitive positioning [27][28] - The introduction of closing auctions to the fixed income market is aimed at providing an end-of-day liquidity solution and improving market organization [6][7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by limited volatility and tight spreads, impacting revenue growth in U.S. credit [5][15] - There is optimism regarding the potential for higher revenue growth in the coming quarters due to ongoing investments and technology enhancements [16][21] - The current market environment is showing signs of increased volatility, which could enhance the attractiveness of the company's all-to-all liquidity solutions [45][46] Other Important Information - The company generated $385 million in free cash flow over the trailing 12 months and repurchased 595,000 shares year-to-date for a total of $120 million [20] - Total operating expenses increased by only 3%, driven by higher employee compensation and technology costs, while headcount rose by 2% [19] Q&A Session Summary Question: Can you talk about the pipeline to add additional dealers for MIDEX and how it's interacting with portfolio trading? - The MIDEX solution is seeing good early volumes, and plans are in place to increase the number of sessions to enhance dealer participation [24][25] Question: What actions are being taken to deliver faster technology enhancements and address competition? - The company is investing in multiple technology areas to address competitive dynamics and enhance overall service offerings [27][28] Question: Can you provide insights on the closing auctions and their potential impact on market share? - The closing auction is designed to support the growing indexation of the fixed income market, with significant partnerships established to enhance liquidity [33][34] Question: How does the company plan to grow in a low-volatility environment? - The strategy includes focusing on portfolio trading and dealer-to-dealer initiatives, which are expected to perform well even in low-volatility conditions [50][51] Question: What are the expectations for the block trading market and its growth? - The block market is seen as a significant opportunity, with recent growth rates indicating positive momentum, particularly in U.S. investment-grade [41][42]