MarketAxess Holdings Inc., an electronic trading platform for fixed-income securities, has released its financial results for the third quarter of 2023. The report shows a stable revenue of $172.3 million, identical to the previous year. However, an uptick of 10% in total expenses, primarily due to strategic investments, led to a lower operating income of $66.9 million.
MarketAxess Reports Higher Revenue but Lower Net Income
The company's total revenue for the quarter remained unchanged at $172.3 million, reflecting the impact of low credit spread volatility . Operating income saw a decline, standing at $66.9 million, mainly due to a boost of 10% in total expenses. These expenses were primarily incurred to tap into long-term revenue opportunities in the global fixed-income markets.
Despite the increased expenses, MarketAxess maintains a robust financial position with $553.3 million in cash, cash equivalents, and investments. The company has also declared a quarterly cash dividend of $0.72 per share.
MarketAxess reported a diluted EPS of $1.46, with a net income of $54.9 million. Compared to last year's quarter, this represents a decrease of 4% in both metrics.
Table: 3Q 2023 select financial results
$ in millions, except per share data | Revenues | Operating Income | Net Income | Diluted EPS | Net Income | EBITDA3 | EBITDA
Margin |
3Q23 | $172 | $67 | $55 | $1.46 | 31.9% | $83 | 48.1% |
3Q22 | $172 | $76 | $59 | $1.58 | 34.5% | $93 | 54.0% |
% Change | - | (12%) | (7%) | (8%) | (260) bps | (11%) | (590) bps |
YTD 2023 | $555 | $238 | $188 | $5.01 | 33.9% | $284 | 51.2% |
YTD 2022 | $540 | $249 | $191 | $5.07 | 35.3% | $303 | 56.2% |
% Change | 3% | (4%) | (2%) | (1%) | (140) bps | (6%) | (500) bps |
One of the bright spots in the report was the record information services revenue of $11.8 million, marking an improvement of 21.5%. This growth is attributed to the increasing adoption of the Composite+ data analytics tool.
Diversification and Trading Volume
The company exhibited strong geographic and product diversification. Average daily volume (ADV) from international products, including emerging markets and Eurobonds, increased by 11.3%. Municipal bonds also saw a rise of 7.4% in ADV. Automated trading volume and trade count broke previous records, surpassing full-year 2022 levels.
Table: 3Q 2023 trading volume
CREDIT | RATES | ||||||||||
$ in millions | US/UK
Trading | Total | Total | High-Grade | High-Yield | Emerging | Eurobonds | Municipal | Total | US Govt. | Agcy./Other |
3Q23 | 63/64 | $29,285 | $11,156 | $5,179 | $1,294 | $2,799 | $1,484 | $388 | $18,129 | $17,713 | $416 |
3Q22 | 64/64 | $31,440 | $10,974 | $5,124 | $1,626 | $2,592 | $1,255 | $361 | $20,466 | $20,133 | $333 |
% Change | (7%) | 2% | 1% | (20%) | 8% | 18% | 7% | (11%) | (12%) | 25% |
The number of active client firms reached a record 2,093, a positive lift of 6.1%. This includes the highest number of active US credit client firms and international active client firms, indicating a broadening customer base.
Future Outlook
The company has refined its full-year 2023 expense guidance, now ranging from $432.0 million to $438.0 million, including an estimated $12.5 million of M&A-related expenses. The effective tax rate for the full year is expected to be approximately 23.5%, lower than the previously stated range.
Therefore, while MarketAxess faces challenges due to low credit spread volatility and increased expenses, its diversified product offerings and strong client engagement provide a positive outlook for the future.
Recently, MarketAxxes cooperated with Bloomberg and Tradeweb to form a joint venture and establish an independent company with the goal of becoming the consolidated tape provider (CTP) for fixed-income instruments in the European Union.
