MarketAxess, the operator of an electronic trading platform for fixed income securities and the provider of market data and post-trade services for the global fixed income markets, has reported record revenues of USD55.6m for the first quarter ended 31 March 2013.
“We are pleased to report another solid quarter with record revenues and pre-tax income, driven by continued momentum in our core US high-grade business and strong growth in high yield and emerging markets,” says Richard M McVey (pictured), chairman and chief executive of MarketAxess. “Our Open Trading initiatives continue to gain traction and yesterday we announced a strategic alliance with BlackRock that we think will help drive liquidity in the credit markets by facilitating trade flow between users of BlackRock’s Aladdin enterprise investment system and the MarketAxess trading community. In Europe, we completed our acquisition of Xtrakter Limited earlier in the quarter and we are excited about the opportunities presented by the combination of the two companies.”
Pre-tax income was a record USD24.3m, compared to USD22.7m for the first quarter of 2012, an increase of 6.9 per cent. Pre-tax margin was 43.8 per cent, compared to 44.8 per cent for the first quarter of 2012. Net income totalled USD15.3m, or USD0.41 per share on a diluted basis, compared to USD13.5m, or USD0.35 per share on a diluted basis, for the first quarter of 2012.
Commission revenue for the first quarter of 2013 totalled USD47.2m on total trading volume of USD160.4bn, compared to USD44.9m in commission revenue on total trading volume of USD158.0bn for the first quarter of 2012. US high-grade trading volume as a percentage of FINRA’s high-grade TRACE trading volume increased to an estimated 12.3 per cent, compared to an estimated 11.4 per cent for the first quarter of 2012.
All other revenue, which consists of technology products and services, information and post-trade services, investment income and other revenue, increased 43.5 per cent to USD8.4m, compared to USD5.8m for the first quarter of 2012. The increase in all other revenue was principally due to information and post-trade services revenue generated by Xtrakter totalling USD1.9m since the 28 February 2013 acquisition date.
Total expenses for the first quarter of 2013 increased 11.6 per cent to USD31.2m, compared to USD28.0m for the first quarter of 2012. The increase in total expenses was principally due to approximately USD1.7m of Xtrakter operating expenses and an additional USD1.4m of acquisition-related costs incurred during the first quarter of 2013. Excluding Xtrakter operating expenses and acquisition-related costs, total expenses increased less than one per cent from the first quarter of 2012.
The effective tax rate for the first quarter of 2013 was 37.0 per cent, compared to 40.7 per cent for the first quarter of 2012. The first quarter 2013 income tax provision includes a benefit for certain 2012 tax credits enacted into law in 2013 amounting to approximately USD0.4m, or USD0.01 per diluted share.
Employee headcount as of 31 March 2013 was 306, compared to 238 as of 31 March 2012. The 31 March 2013 headcount includes 62 Xtrakter personnel.
The company’s board of directors declared a quarterly cash dividend of USD0.13 per share of common stock outstanding, to be paid on 23 May 2013 to stockholders of record as of the close of business on 9 May 2013.
As of 31 March 2013, total assets were USD282.9m and included USD143.0m in cash, cash equivalents and securities available-for-sale. Total stockholders’ equity as of 31 March 2013 was USD252.5m.
The company is updating its full year 2013 expense and capital spending guidance to reflect the impact of the acquisition of Xtrakter. The company now expects total expenses for 2013 will be in the range of USD137.0m to USD143.0m, up from the original guidance of USD118.0m to USD123.0m. The company also expects total capital spending for 2013 will be in the range of USD15.0m to USD18.0m, up from the original guidance of USD10.0m to USD13.0m. The company is reconfirming its effective tax rate guidance for 2013 ranging from 38 per cent to 40 per cent.