MarketAxess Holdings Inc. Q4 FY2025 earnings call

Key Progress in 2025 - Enhanced global network, liquidity, data, and analytics. - Advanced multi-protocol solutions for buy side and sell side across portfolio trading, block trading, dealer matching, automation, and closing auction protocols. ### Financial Results - 2025 record revenue of $846 million, with 10% growth in non-US credit product areas. - Record total ADV drove record commission and services revenue, resulting in record annual free cash flow of $347 million. - Block trading ADD increased 29%, with record block trading ADD in emerging markets; US high yield portfolio trading market share was 28%; MIDEX protocol had over $3 billion in trading volume. - Non-GAAP expenses grew 5% in 2025. - Returned $474 million to investors via $360 million share repurchases and $114 million dividends. - Completed a $300 million ASR, retiring 1.7 million shares to date. ### Strategic Channels - Portfolio trading: Total global portfolio trading ADV increased 48% to a record $1.4 billion, with US credit portfolio trading market share up 270 basis points in 2025 and 620 basis points in January 2026. - Dealer-initiated: ADV grew 33% for the year, with MIDEX protocol having $7 billion in trading volume in January 2026, up 383%. - Block trading: 24% growth in 2025, with 56% increase in January 2026; EM block trading ADD up 27%, euros up 66%. - Automation suite: Significant increase in Adaptive Auto Ex algo trading volume, with top 20 clients' automated block trading volume up over 125% and Xpro trading volume up 80%.

In 2025, MarketAxess generated record revenue of $846 million. Revenue from product areas outside US credit saw a strong 10% growth. Total credit commission revenue was $165 million, up 2% year-over-year. U.S. high yield credit commission revenue increased 4%, emerging markets grew 6%, and Eurobonds rose 9%, while US high grade declined 1% and municipals dropped 14%. Services revenue was $28 million, up 2%; information services revenue was $13 million, up 2%; post-trade services revenue was $11 million, up 1%; technology services revenue was $4 million, up 2%.

2026 Guidance - Total services revenue (including information, post-trade, and technology services) is expected to grow in the mid-single-digit percent. - Total expenses ex-notables are expected to be in the range of $530 million to $545 million, implying a growth rate of approximately 8% to the midpoint. - Effective tax rate is expected to be in the range of 24% to 26%. - Capital expenditures are expected in the range of $65 million to $75 million, with roughly 80% related to capitalized software development costs for new protocols and trading platform enhancements.

The company notes that its actual results and financial condition may differ materially from forward-looking statements. Risks and factors that could affect future results are discussed in the company's annual report on Form 10-K for the year ended December 31, 2024, such as market volatility, competitive pressures, and technological challenges.

Q: Could you break down the strength in block trading, where it's coming from, and how you're attacking that market?

A: Sure. Block volumes saw substantial growth. In 2025, IG block trading ADD grew 18%, high yield 19%, EM 27%, and euros 66%. Q4 block volume was $5 billion, and January 2026 saw 33% of credit volume in blocks. Growth comes from various protocols like targeted RFQ in EM and euros, automation solution, algo suite, MIDX, and closing auction platform.

Q: Can you talk about competitive pricing pressures driving the decline in average fee rate in credit and the fee rate decline assumption in medium-term revenue growth outlook?

A: Product mix, protocol selection, maturity, spread, and volatility impact fee per million. Protocol and product mix, like shift to portfolio trading with lower fee per million, affects it. Medium-term, while not giving specific fee per million assumptions, growth is expected from new initiatives and incremental revenue.

Q: Give an update on emerging markets, roadmap, and competitive dynamics.

A: Emerging markets is an exciting area, similar in size to US credit. Electronic penetration is under 10% and growing. We see growth in EM block trading, with January 2026 EM ADV up 50%. Competing with chat and phone in EM, we have investments in regional offices and protocols like all-to-all RFQ and RFM.

Q: Talk about revenues outside of U.S. Credit, growth drivers, and multiyear outlook.

A: Non-US credit revenues grew 10% in 2025. Services revenue had 6% growth in 2025, guiding mid-single-digit growth in 2026. Driven by volume levers, protocol initiatives, and market share, with focus on converting market from phone to platform.

Q: How are you thinking about share repurchases as we go through 2026 given strong start to the year for volumes?

A: First order of business is to pay down the revolver used for ASR. There's $25 million left in share repurchase authorization with no end date, and dividend was increased to $0.78 per share.

Q: What gives you confidence about reaccelerating electronification in 2026 given slowdown in 2025?

A: Market opportunity for electronification is larger than converted today. Focus is on converting the 50% block market in US credit. Portfolio trading, EM electronic penetration, and automation suite growth contribute.

Q: Does capital allocation change regarding allocating incremental dollar to US credit vs other areas, and update on opening and closing auction initiative?

A: Investment in block solution has high returns as it scales across product sets. Closing auction was launched, in pilot phase, with 3 dealers supporting liquidity, 11 buy-side clients active, and $900 million in orders submitted.

Q: Speak to ambitions and visions around embedding AI more broadly across the business, portion of client flows automatable, and execution outcome feedback.

A: AI is an exciting area. Dataset is powerful for leveraging AI, including in transparency in local markets, portfolio construction, trading signals, depth of liquidity, spread prediction, and chat functionality. Opportunities are huge with proprietary data.