MARKETAXESS HOLDINGS INC Q2 FY2024 earnings call

Key Points

• Chris Concannon noted 10% total revenue growth, solid commission revenue growth across most credit products, especially internationally. Total operating expenses increased 12% including Pragma impact.
• Strategic priorities include growing market share via X-Pro rollout, global multiproduct portfolio trading, AI dealer selection tool, and new take algo.
• Rich Schiffman highlighted international client trade volume growth, Open Trading performance (ADV $4B, 34% share), and growth in automation suite with 10% of credit volume and 27% of trade count from automation.
• Ilene Fiszel Bieler reviewed financials, mentioned revenue growth, disciplined expense management, $200M share repurchase program, strong balance sheet with $559M in cash equivalents and investments, and $298M free cash flow over trailing 12 months.

Total revenue for the second quarter was $198 million, up 10% from the prior year, including $8 million from the Pragma acquisition. Diluted earnings per share was $1.72. Commission revenue was $172 million, up 8%. Information services revenue was $13 million, up 8%, driven by new contracts and strong adoption of data products. Post-trade services revenue was $10 million, up 10%. Other income included $6 million in interest income due to favorable interest rates, partially offset by a $1 million net foreign currency transaction loss. Emerging markets commission revenue increased 22%, with EM TRACE-Eligible estimated market share of 26%. LATAM and APAC emerging markets trading volume was up 27% and 35% respectively. Local markets RFM activity was up 45%. Open Trading ADV was $4 billion, with a 34% share of total credit volume. Automation trade volume represented 10% of total credit volume and 27% of total credit trade count, with three-year CAGRs of 29% and 39% for trade volume and count respectively.

Forward-Looking Statements

• Full year 2024 expenses are expected to be slightly below the previously stated range of $480 million to $500 million.
• Board approved a new $200 million share repurchase program, adding to the existing $50 million authorization for a total of $250 million.
• Positive macro backdrop with potential rate cuts and increased volatility seen as indicators of an improving outlook for future growth.

Q: Dig in a little bit on the ICE deal. Any color on how it came about, benefits of connecting to ICE's liquidity, and update on connecting to other liquidity pools?

A: Chris Concannon stated it's a response to client needs, leveraging existing relationships with ICE, connecting two leading liquidity pools to benefit clients. Rich Schiffman added it's complementary liquidity pools, bringing odd lot liquidity to institutional clients.

Q: Expand on the rollout of X-Pro and behavior change post adoption?

A: Chris Concannon said over 60% of trade activity from largest clients comes through X-Pro, with 56% of portfolio trades in Q2 using X-Pro. Rollout moving to Europe with global PT solution.

Q: Growth outlook for emerging markets over next 3-5 years?

A: Chris Concannon mentioned strong growth in emerging markets, particularly local markets with 22% revenue growth, India added to indexes as a driver, and growth in portfolio trading and block-size liquidity in EM.