MarketAxess(US:MKTX)2022-01-26 18:27Financial Data and Key Metrics Changes - MarketAxess reported fourth quarter revenue of $165 million, a 4% decrease from the prior year, attributed to a 6% decline in credit trading volume and lower fee capture [30][31] - Full year 2021 marked the 13th consecutive year of record revenues, with a 2-year compound growth rate for revenue at 17% and operating income at 16% [13][14] - Fourth quarter EBITDA was $86.3 million, and diluted EPS was $1.37 [32] Business Line Data and Key Metrics Changes - U.S. government bond volume reached a record of $4.1 trillion in 2021, with significant dealer and investor participation [11] - Municipal bond trading grew 42% to $6.6 billion in the fourth quarter, with MuniBrokers integration completed [25] - Open Trading facilitated over $15 billion in notional value daily, with nearly 1,700 firms active in the network [21] Market Data and Key Metrics Changes - Market conditions in 2021 were challenging due to historically low credit spreads and volatility, leading to a year-over-year decline in total credit market volumes [15] - Estimated market share for U.S. high-grade and high-yield is running similar to Q1 last year, while TRACE market volumes are down about 17% [17] - Emerging market share is running well above last year, with estimated volumes down about 7% [17] Company Strategy and Development Direction - The company aims to be the 1 portfolio trading provider in 2022, expanding its foundation for growth in new product areas [10] - Investments in geographic and product diversification are yielding a 24% 2-year compound revenue growth in areas outside the core U.S. corporate bond business [14] - The company is focused on enhancing its trading protocols and expanding its electronic trading solutions to capture a larger market share [23] Management's Comments on Operating Environment and Future Outlook - Management anticipates a return to more normal levels of interest rates and bond market volatility in the coming quarters [16] - The company believes that the extended period of quantitative easing has led to low volatility, which is expected to change with central banks preparing for rate increases [16] - Management expressed confidence in the future growth of electronic trading in fixed income markets, projecting that electronic market share could exceed 50% [18] Other Important Information - The company completed the acquisition of Regulatory Reporting Hub, driving post-trade services revenue to $9.4 million, up 43% year-over-year [26] - A new $150 million share repurchase program was authorized by the Board of Directors, following the exhaustion of a previous $100 million program [37] - The effective tax rate for the fourth quarter was 27.1%, with a full year effective tax rate of 22.8% [32] Q&A Session Summary Question: Expense guidance variability based on revenue changes - Management indicated that variable expenses are roughly 18% to 20% of the total expense base, allowing for adjustments based on market conditions [46][47] Question: Update on all-to-all trading for munis and rates - The all-to-all solution for munis constitutes about 46% of the muni business, with ongoing rollout for U.S. treasuries [48][49] Question: Electronifying securitized markets - Management acknowledged low electronification levels in securitized markets but sees potential for future product expansion [52] Question: Investment spend and headcount growth - Investments will focus on talent, trading system enhancements, and geographical expansion, with no items tabled for 2023 [55][56] Question: Buyback authorization and M&A outlook - The capital management strategy prioritizes investments in the trading platform while seeking opportunistic M&A opportunities [60][61] Question: Non-transactional revenue outlook - Information services are expected to continue double-digit growth, driven by new product launches [63][64] Question: Portfolio trading market evolution - Management aims to be 1 in portfolio trading, with expectations of increased demand as market volatility rises [73][74] Question: Treasury market structure and regulatory changes - Regulatory focus on the U.S. treasury market is expected to remain favorable for all-to-all trading solutions [104][105]