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MarketAxess (MKTX) Q1 Earnings Beat on Strong Credit Trading
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MarketAxess Holdings Inc. (MKTX - Free Report) reported first-quarter 2024 earnings per share of $1.92, which surpassed the Zacks Consensus Estimate by 3.8%. Yet, the bottom line slipped 2% year over year.
Total revenues of $210 million rose 4% year over year. However, the top line fell short of the consensus mark by a whisker.
The quarterly results were driven by a solid improvement in U.S. high-grade commission revenues. Geographic expansion and product diversification drove the average daily volume (“ADV”) of emerging markets and Eurobonds. However, the upside was partly offset by lesser trading activity of U.S. high-yield and an elevated expense level.
MarketAxess Holdings Inc. Price, Consensus and EPS Surprise
Commission revenues totaled $184.9 million, which inched up 1.6% year over year but missed the Zacks Consensus Estimate of $185.3 million and our estimate of $185.6 million. Information services revenues advanced 7.9% year over year to $11.9 million. The figure lagged the consensus mark of $12.3 million but matched our estimate. The metric benefited on the back of net new data contract revenues.
Post-trade services revenues of $10.7 million improved 7.5% year over year, attributable to price increases and net new contract revenues. The reported figure beat our estimate of $10.3 million. Revenues from the Pragma acquisition were $7.5 million.
Total expenses of $117.8 million escalated 9.3% year over year due to higher employee compensation and benefits, technology and communication expenses and clearing costs. However, the metric fell short of our estimate of $124.5 million.
MKTX’s operating income fell 3% year over year to $92.5 million, higher than our estimate of $85.8 million. EBITDA of $109.3 million dipped 1% year over year while EBITDA margin deteriorated 250 bps to 51.9%.
Trading Volumes in Detail
The high-grade trading volume of MarketAxess was $456 billion, which advanced 16.1% year over year and outpaced the Zacks Consensus Estimate of $436.3 billion. The ADV of the same product category improved 18% year over year to $7.5 billion, higher than the consensus mark of $7.1 billion and our estimate of $6.7 billion.
However, high-yield trading volume plunged 30.5% year over year while its ADV fell 29.4% due to a reduced level of credit spread volatility.
Other credit trading volume tumbled 8.2% to $26.3 billion whereas ADV of the same product category slipped 6.5% year over year to $432 million.
Trading volume and ADV of emerging markets rose 15.4% and 17.3%, respectively, on a year-over-year basis. The Eurobonds’ trading volume and ADV rose 8.9% and 10.6%, respectively, on a year-over-year basis.
Total credit trading volume of $918 billion advanced 7.4% year over year and surpassed the Zacks Consensus Estimate of $897 billion and our estimate of $873.5 billion. Total credit ADV rose 9.2% year over year to $15 billion, higher than the consensus mark of $14.3 billion and our estimate of $14.1 billion.
Total rates’ trading volume plunged 29% while ADV of this product category dropped 27.9% year over year.
Balance Sheet (As of Mar 31, 2024)
MarketAxess exited the first quarter with cash and cash equivalents of $376.7 million, which declined 16.5% from the 2023-end level. Total assets of $1.9 billion decreased 4.4% from the figure at 2023 end.
The company had no outstanding borrowing under its credit facility at the first-quarter end. Total stockholders’ equity of $1.3 billion grew 2% from the 2023-end level.
Cash Flows
Cash used in operations amounted to $4.9 million against cash generated from operations of $7.5 million in the prior-year quarter. Free cash flow was recorded at $30.9 million, which tumbled 29.4% year over year.
Capital Deployment Update
MarketAxess bought back shares worth $10.1 million. A leftover capacity of $89.9 million remained in place under the company’s authorized repurchase program as of Mar 31, 2024.
Management approved a quarterly cash dividend of 74 cents per share, which will be paid out on Jun 5, 2024, to shareholders of record as of May 22, 2024.
2024 Guidance
Management continues to anticipate revenues from the Pragma acquisition to grow in mid-single digits while expenses are expected within the range of $33-$35 million.
Total expenses (including the Pragma acquisition) continue to be estimated between $480 million and $500 million but the metric is expected to stay at the lower end of the guided range.
Capital expenditure continues to be projected between $60 million and $65 million while the effective tax rate is reaffirmed to lie between 24% and 25%.
Here are some other Finance sector players that have reported first-quarter results so far. The bottom-line results of Euronet Worldwide, Inc. (EEFT - Free Report) , Virtu Financial, Inc. (VIRT - Free Report) and Cboe Global Markets, Inc. (CBOE - Free Report) beat the Zacks Consensus Estimate.
Euronet reported first-quarter adjusted earnings of $1.28 per share, which surpassed the Zacks Consensus Estimate by 28%. The bottom line soared 47%. Total revenues were $857 million, which improved 9% year over year and on a constant-currency basis. The top line beat the consensus mark by 2.3%. EEFT’s net income climbed 32.3% year over year to $26.2 million. Operating income of $64 million advanced 40% year over year, or 45% on a constant-currency basis. Adjusted EBITDA rose 17% year over year, or 19% on a constant-currency basis, to $108.8 million.
The EFT Processing segment recorded revenues of $217.2 million, which grew 13% year over year, or 12% on a constant-currency basis. Adjusted EBITDA soared 51% year over year, or 54% on a constant-currency basis, to $44.7 million. Total transactions of the unit climbed 36% to 2,502 million. The epay segment’s revenues advanced 8% year over year and on a constant-currency basis to $257.1 million. The Money Transfer segment generated revenues of $384.6 million, which advanced 7% year over year and on a constant-currency basis.
Virtu Financial reported first-quarter 2024 adjusted earnings per share of 76 cents, which outpaced the Zacks Consensus Estimate by 28.8%. The bottom line advanced 2.7% year over year. Total revenues improved 3.6% to $642.8 million. Adjusted net trading income slid 1.7% to $366.9 million. Revenues from commissions, net and technology services amounted to $118.6 million, which slipped 2.3% year over year. Interest and dividends income of $106 million climbed 28.9% year over year.
Adjusted EBITDA of VIRT declined 2.2% to $202.8 million. Adjusted EBITDA margin of 55.3% deteriorated 30 basis points year over year. Adjusted net trading income in the Market Making segment was $273.7 million, down 1.5% year over year. The segment’s revenues rose 4.4% to $521 million. The Execution Services unit recorded an adjusted net trading income of $93.2 million, which fell 2.1% year over year.
Cboe Global reported first-quarter 2024 adjusted earnings of $2.15 per share, which outpaced the Zacks Consensus Estimate by 5.4%. The bottom line increased 13% year over year. Total adjusted revenues of CBOE Global were $502.1 million, which improved 7% year over year. The top line missed the consensus mark by 1.2%. Options revenues climbed 10% to $307.4 million. Revenues of North American Equities totaled $92.6 million, which decreased 1% year over year. Europe and Asia Pacific revenues increased 10% to $54.1 million.
Futures net revenues decreased 2% year over year to $30.5 million. Global FX net revenues decreased 1% to $18.4 million, primarily due to lower net transaction and clearing fees. Adjusted operating income grew 8% to $309.2 million. Adjusted operating margin was 61.6%, which expanded 110 basis points year over year. Adjusted EBITDA margin of 67.2% expanded 140 bps year over year.
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MarketAxess (MKTX) Q1 Earnings Beat on Strong Credit Trading
MarketAxess Holdings Inc. (MKTX - Free Report) reported first-quarter 2024 earnings per share of $1.92, which surpassed the Zacks Consensus Estimate by 3.8%. Yet, the bottom line slipped 2% year over year.
Total revenues of $210 million rose 4% year over year. However, the top line fell short of the consensus mark by a whisker.
The quarterly results were driven by a solid improvement in U.S. high-grade commission revenues. Geographic expansion and product diversification drove the average daily volume (“ADV”) of emerging markets and Eurobonds. However, the upside was partly offset by lesser trading activity of U.S. high-yield and an elevated expense level.
MarketAxess Holdings Inc. Price, Consensus and EPS Surprise
MarketAxess Holdings Inc. price-consensus-eps-surprise-chart | MarketAxess Holdings Inc. Quote
Quarterly Operational Update
Commission revenues totaled $184.9 million, which inched up 1.6% year over year but missed the Zacks Consensus Estimate of $185.3 million and our estimate of $185.6 million. Information services revenues advanced 7.9% year over year to $11.9 million. The figure lagged the consensus mark of $12.3 million but matched our estimate. The metric benefited on the back of net new data contract revenues.
Post-trade services revenues of $10.7 million improved 7.5% year over year, attributable to price increases and net new contract revenues. The reported figure beat our estimate of $10.3 million. Revenues from the Pragma acquisition were $7.5 million.
Total expenses of $117.8 million escalated 9.3% year over year due to higher employee compensation and benefits, technology and communication expenses and clearing costs. However, the metric fell short of our estimate of $124.5 million.
MKTX’s operating income fell 3% year over year to $92.5 million, higher than our estimate of $85.8 million. EBITDA of $109.3 million dipped 1% year over year while EBITDA margin deteriorated 250 bps to 51.9%.
Trading Volumes in Detail
The high-grade trading volume of MarketAxess was $456 billion, which advanced 16.1% year over year and outpaced the Zacks Consensus Estimate of $436.3 billion. The ADV of the same product category improved 18% year over year to $7.5 billion, higher than the consensus mark of $7.1 billion and our estimate of $6.7 billion.
However, high-yield trading volume plunged 30.5% year over year while its ADV fell 29.4% due to a reduced level of credit spread volatility.
Other credit trading volume tumbled 8.2% to $26.3 billion whereas ADV of the same product category slipped 6.5% year over year to $432 million.
Trading volume and ADV of emerging markets rose 15.4% and 17.3%, respectively, on a year-over-year basis. The Eurobonds’ trading volume and ADV rose 8.9% and 10.6%, respectively, on a year-over-year basis.
Total credit trading volume of $918 billion advanced 7.4% year over year and surpassed the Zacks Consensus Estimate of $897 billion and our estimate of $873.5 billion. Total credit ADV rose 9.2% year over year to $15 billion, higher than the consensus mark of $14.3 billion and our estimate of $14.1 billion.
Total rates’ trading volume plunged 29% while ADV of this product category dropped 27.9% year over year.
Balance Sheet (As of Mar 31, 2024)
MarketAxess exited the first quarter with cash and cash equivalents of $376.7 million, which declined 16.5% from the 2023-end level. Total assets of $1.9 billion decreased 4.4% from the figure at 2023 end.
The company had no outstanding borrowing under its credit facility at the first-quarter end. Total stockholders’ equity of $1.3 billion grew 2% from the 2023-end level.
Cash Flows
Cash used in operations amounted to $4.9 million against cash generated from operations of $7.5 million in the prior-year quarter. Free cash flow was recorded at $30.9 million, which tumbled 29.4% year over year.
Capital Deployment Update
MarketAxess bought back shares worth $10.1 million. A leftover capacity of $89.9 million remained in place under the company’s authorized repurchase program as of Mar 31, 2024.
Management approved a quarterly cash dividend of 74 cents per share, which will be paid out on Jun 5, 2024, to shareholders of record as of May 22, 2024.
2024 Guidance
Management continues to anticipate revenues from the Pragma acquisition to grow in mid-single digits while expenses are expected within the range of $33-$35 million.
Total expenses (including the Pragma acquisition) continue to be estimated between $480 million and $500 million but the metric is expected to stay at the lower end of the guided range.
Capital expenditure continues to be projected between $60 million and $65 million while the effective tax rate is reaffirmed to lie between 24% and 25%.
Zacks Rank
MarketAxess currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Sector Players
Here are some other Finance sector players that have reported first-quarter results so far. The bottom-line results of Euronet Worldwide, Inc. (EEFT - Free Report) , Virtu Financial, Inc. (VIRT - Free Report) and Cboe Global Markets, Inc. (CBOE - Free Report) beat the Zacks Consensus Estimate.
Euronet reported first-quarter adjusted earnings of $1.28 per share, which surpassed the Zacks Consensus Estimate by 28%. The bottom line soared 47%. Total revenues were $857 million, which improved 9% year over year and on a constant-currency basis. The top line beat the consensus mark by 2.3%. EEFT’s net income climbed 32.3% year over year to $26.2 million. Operating income of $64 million advanced 40% year over year, or 45% on a constant-currency basis. Adjusted EBITDA rose 17% year over year, or 19% on a constant-currency basis, to $108.8 million.
The EFT Processing segment recorded revenues of $217.2 million, which grew 13% year over year, or 12% on a constant-currency basis. Adjusted EBITDA soared 51% year over year, or 54% on a constant-currency basis, to $44.7 million. Total transactions of the unit climbed 36% to 2,502 million. The epay segment’s revenues advanced 8% year over year and on a constant-currency basis to $257.1 million. The Money Transfer segment generated revenues of $384.6 million, which advanced 7% year over year and on a constant-currency basis.
Virtu Financial reported first-quarter 2024 adjusted earnings per share of 76 cents, which outpaced the Zacks Consensus Estimate by 28.8%. The bottom line advanced 2.7% year over year. Total revenues improved 3.6% to $642.8 million. Adjusted net trading income slid 1.7% to $366.9 million. Revenues from commissions, net and technology services amounted to $118.6 million, which slipped 2.3% year over year. Interest and dividends income of $106 million climbed 28.9% year over year.
Adjusted EBITDA of VIRT declined 2.2% to $202.8 million. Adjusted EBITDA margin of 55.3% deteriorated 30 basis points year over year. Adjusted net trading income in the Market Making segment was $273.7 million, down 1.5% year over year. The segment’s revenues rose 4.4% to $521 million. The Execution Services unit recorded an adjusted net trading income of $93.2 million, which fell 2.1% year over year.
Cboe Global reported first-quarter 2024 adjusted earnings of $2.15 per share, which outpaced the Zacks Consensus Estimate by 5.4%. The bottom line increased 13% year over year. Total adjusted revenues of CBOE Global were $502.1 million, which improved 7% year over year. The top line missed the consensus mark by 1.2%. Options revenues climbed 10% to $307.4 million. Revenues of North American Equities totaled $92.6 million, which decreased 1% year over year. Europe and Asia Pacific revenues increased 10% to $54.1 million.
Futures net revenues decreased 2% year over year to $30.5 million. Global FX net revenues decreased 1% to $18.4 million, primarily due to lower net transaction and clearing fees. Adjusted operating income grew 8% to $309.2 million. Adjusted operating margin was 61.6%, which expanded 110 basis points year over year. Adjusted EBITDA margin of 67.2% expanded 140 bps year over year.