"We are very pleased to announce record revenues, operating income and EBITDA for the full year 2012," said Richard M. McVey, chairman and chief executive officer of MarketAxess. "In the fourth quarter we also achieved record market share in U.S. high-grade, and quarterly volume records for high yield and emerging markets demonstrating our ongoing strong growth in these products. Our open trading initiatives continue to gain traction and we are excited to be at the center of market structure changes that are driving increased electronic trading in credit."

Fourth Quarter Results
Total revenues for the fourth quarter of 2012 increased 11.6% to $50.4 million, compared to $45.1 million for the fourth quarter of 2011. Pre-tax income was $21.5 million, compared to $18.9 million for the fourth quarter of 2011, an increase of 14.1%. Pre-tax margin was 42.7%, compared to 41.8% for the fourth quarter of 2011. Net income totaled $20.5 million, or $0.54 per share on a diluted basis, compared to $11.5 million, or $0.29 per share on a diluted basis, for the fourth quarter of 2011. The fourth quarter 2012 results include a favorable income tax adjustment of $6.7 million, or $0.18 per share, relating to certain previously unrecognized tax benefits. The Company received new information from a taxing authority in the fourth quarter of 2012 and updated the recognition of certain acquired net operating loss carryforwards. Excluding this income tax adjustment, net income totaled $13.7 million, or $0.36 per share on a diluted basis.

Commission revenue for the fourth quarter of 2012 totaled $44.2 million on total trading volume of $149.1 billion, compared to $38.8 million in commission revenue on total trading volume of $125.2 billion for the fourth quarter of 2011. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 13.6%, compared to an estimated 12.2% for the fourth quarter of 2011.

All other revenue, which consists of technology products and services, information and user access fees, investment income and other revenue, decreased to $6.2 million, compared to $6.4 million for the fourth quarter of 2011.

Total expenses for the fourth quarter of 2012 increased 9.9% to $28.9 million, compared to $26.3 million for the fourth quarter of 2011. The increase in expenses during the fourth quarter of 2012 was primarily due to higher professional and consulting fees and employee compensation and benefits costs. Fourth quarter 2012 expenses included approximately $1.0 million of Xtrakter acquisition-related costs. Fourth quarter 2011 expenses included an accounts receivable allowance provision and minority investment write-off aggregating approximately $1.5 million.

The effective tax rate for the fourth quarter of 2012 was 4.9%, compared to 38.8% for the fourth quarter of 2011. Excluding the impact of the non-recurring favorable income tax adjustment, the effective tax rate for the fourth quarter was 36.3%.

Employee headcount as of December 31, 2012 was 240, compared to 232 as of December 31, 2011.

Full Year 2012 Results
Total revenues for the year ended December 31, 2012 increased 9.4% to a record $198.2 million, compared to $181.1 million for 2011. Pre-tax income was a record $86.7 million, compared to $78.7 million for 2011, an increase of 10.1%. Pre-tax margin was 43.7%, compared to 43.5% for 2011. Net income totaled $60.1 million, or $1.59 per share on a diluted basis, compared to $47.7 million, or $1.20 per share on a diluted basis, for 2011.

Excluding the income tax adjustment, net income totaled $53.3 million, or $1.41 per share on a diluted basis.

Commission revenue for the year ended December 31, 2012 increased 12.1% to $174.2 million, compared to $155.4 million for 2011. Variable transaction fees increased 25.3% to $114.9 million on total trading volume of $589.6 billion, compared to variable transaction fees of $91.7 million on total trading volume of $525.0 billion for 2011.

All other revenue decreased 6.4% to $24.0 million, compared to $25.7 million for 2011. The decrease was primarily due to lower technology license purchase and professional consulting revenues.

Total expenses for the year ended December 31, 2012 increased 8.9% to $111.5 million, compared to $102.4 million for 2011. The increase was primarily due to higher professional and consulting fees of $2.9 million, technology and communications expense of $1.9 million, and employee compensation and benefits expense of $1.6 million. Capital spending for the year ended December 31, 2012 was $10.4 million compared to $7.2 million in 2011.
The effective tax rate for 2012 was 30.7%, compared to 39.4% for 2011. Excluding the income tax adjustment, the effective tax rate for 2012 was 38.5%.

Dividend
The Company's board of directors declared a quarterly cash dividend of $0.13 per share of common stock outstanding, to be paid on February 28, 2013 to stockholders of record as of the close of business on February 14, 2013. This represents an increase of $0.02 per share in the quarterly cash dividend.

Share Repurchase Program Update
In October 2011, the Company's board of directors approved a $35 million share repurchase program. A total of 85,203 shares were repurchased in the fourth quarter of 2012 at a cost of $2.5 million.

Balance Sheet Data
As of December 31, 2012, total assets were $279.8 million and included $180.1 million in cash, cash equivalents and securities available-for-sale. Total stockholders' equity as of December 31, 2012 was $242.7 million.

Guidance for 2013
Excluding the impact of the pending acquisition of Xtrakter, the Company expects total expenses for 2013 to be in the range of $118.0 million to $123.0 million and its full year 2013 capital spending to be in the range of $10.0 million to $13.0 million. The Company also anticipates that the overall effective tax rate for 2013 will be between 38% and 40%.