MARKETAXESS HOLDINGS INC Q2 FY2025 earnings call

• Strong revenue growth driven by favorable market conditions and new initiatives. Record trading volume across credit and rates products, with over $1 trillion in credit and $2 trillion in rates. - Growth in client-initiated channel: 38% growth in block trading ADV across U.S. credit, emerging markets, and Eurobonds. Portfolio trading channel saw a 69% increase in total portfolio trading ADV. Dealer-initiated channel had a 40% increase in dealer-initiated ADV. - Launch of targeted block trading solution drove record block trading volumes in U.S. high-grade, emerging markets, and Eurobonds. Market share in U.S. credit portfolio trading increased 240 basis points. - Strategic hires like Dean Berry and Spencer Lee to accelerate growth. Execution of first Indian Government Bond Trade electronically, deepening EM franchise. - Cost discipline with expenses up 5% excluding notables and FX, while investing in platform enhancements.

Revenue grew 11% to a record $219 million, including a $2 million FX benefit. Excluding FX, revenue was up 10%. Commission revenue saw a 12% increase to $192 million, driven by strong trading volume across most product areas, with total credit trading volume surpassing $1 trillion and total rates trading volume reaching $2 trillion. Services revenue was $28 million (up 7%), Information Services revenue $13 million (up 4%), Post-trade services revenue $11 million (up 7%), and Technology Services revenue $4 million (up 16%). In terms of segment contribution, commission revenue was the largest at $192 million, representing a significant portion of the total revenue growth.

• Reaffirmed full-year 2025 expense guidance, expecting to be at the low end of the $501 million to $521 million ex notable non-GAAP expense range. - Expect growth in U.S. credit through continued progress in client-initiated, portfolio, and dealer-initiated channels, supported by expanded leadership team. - Anticipate impact from Mid-X launch in September for U.S. credit and ongoing product enhancements in portfolio trading platform.

• Market share fluctuations due to macro environment, such as swings in block volume between phone and electronic trading. - Protocol mix affecting fee capture. - Dependence on market conditions for trading volume and revenue, as seen in July U.S. high-grade market share decline due to tightened spreads and low volatility.

Q: Give more details on the progress to date on the new initiatives, client penetration, adoption, and reconcile Q2 momentum with July market share.

A: Talks about client-initiated, portfolio, and dealer channels growth (e.g., 38% block trading ADV growth, 69% portfolio trading ADV increase), and explains July market dynamics were due to narrow spreads and low volatility leading to portfolio trading and phone/chat block market growth.

Q: Elaborate on drivers of fee per million decline and expectations going forward.

A: Fee per million affected by protocol and product mix; moves in high-grade duration can offset pressure from portfolio trading volumes.

Q: Provide more detail on U.S. blocks, adoption, rollout pace, and success expectations.

A: Block trading growing in EM, Eurobonds, and U.S. with new solutions, but early days in U.S. with dealer content rollout; excited about progress and future impact.

Q: Talk about PT market, client use, and market opportunity.

A: PT thrives in low vol, but seen in high yield during volatile times; market opportunity small in revenue but important for market share.

Q: Expand on new strategic hires, their tasks, KPIs, and impact timeline.

A: Spencer Lee oversees U.S. credit product, Dean Berry joining late September with M&A, data analytics, and P&L experience; expect their input to drive product and growth.

Q: Ask about capital return priorities and M&A in mix.

A: Focus on organic growth, share repurchases, and bolt-on acquisitions like Pragma, muni brokers, etc.

Q: Dig into Europe performance, share gains, and drivers.

A: Eurobond growth driven by block, portfolio, and dealer initiatives; strong client adoption and market share increases.

Q: Follow up on hires and team execution.

A: Excited about team with Spencer Lee's buy-side trader and EMS experience, Dean Berry's international and M&A expertise; confident in execution.