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MarketAxess posts Q1 earnings rise

02 May 2007  |  1049 views  |  0 Source: MarketAxess Holdings

MarketAxess Holdings Inc. (NasdaqGS:MKTX), the operator of a leading electronic trading platform for U.S. and European high-grade corporate bonds, emerging markets bonds and other types of fixed income securities, today announced results for the first quarter ended March 31, 2007.

Total revenues for the first quarter of 2007 increased 16.8% to a record $23.8 million, compared to $20.3 million in the first quarter of 2006. Pre-tax income for the first quarter of 2007 was $4.5 million, an increase of 219.4% compared to $1.4 million in the first quarter of 2006. Net income in the first quarter of 2007 totaled $2.5 million, or $0.07 per share on a diluted basis, an increase of 125.6% compared to $1.1 million, or $0.03 per share on a diluted basis, in the first quarter of 2006.

Pre-tax margin in the first quarter of 2007 was 18.8%, compared to 6.9% in the first quarter of 2006.

Richard M. McVey, chairman and chief executive officer of MarketAxess, commented, "The earnings momentum that we experienced in the second half of 2006 carried through to the first quarter of 2007 with record quarterly volume and revenue generation. These strong results, driven by improving market volumes, market share gains and continued expense discipline, expanded our pre-tax margin to 18.8%, reflecting the strong operating leverage in our business."

Mr. McVey continued, "In the first quarter of 2007, our estimated share of the U.S. high-grade market was 9.4%, which included a record estimated market share of 11.0% in March 2007. As we move through the second quarter and the remainder of 2007, we will continue to focus on increased share gains in our core markets and a growing revenue contribution from our newer product sectors."

First Quarter Results

Total revenues for the first quarter of 2007 increased 16.8% to a record $23.8 million, compared to $20.3 million in the first quarter of 2006. U.S. high-grade corporate bond commissions increased 24.1% to a record $13.7 million in the first quarter of 2007, compared to $11.0 million in the first quarter of 2006. European high-grade corporate bond commissions totaled a record $4.8 million in the first quarter of 2007, an increase of 9.6% compared to $4.3 million in the first quarter of 2006. Other commissions increased 6.4% in the first quarter of 2007 to a record $2.3 million, compared to $2.1 million in the first quarter of 2006. Other revenue, which consists of information and user access fees, license fees, investment income and other revenue, increased 7.7% to $3.1 million in the first quarter of 2007, compared to $2.9 million in the first quarter of 2006.

Total expenses for the first quarter of 2007 increased 1.9% to $19.3 million, compared to $18.9 million in the first quarter of 2006. Employee compensation and benefits expense increased 11.9% to $11.5 million, compared to $10.3 million in the first quarter of 2006. The increase in employee compensation and benefits was partially offset by a 28.0% decrease in professional and consulting expenses to $1.8 million, compared to $2.6 million in the first quarter of 2006.

Pre-tax income in the first quarter of 2007 was $4.5 million, an increase of 219.4% compared to $1.4 million in the first quarter of 2006. Pre-tax margin was 18.8% in the first quarter of 2007, compared to 6.9% in the first quarter of 2006.

The effective tax rate for the first quarter of 2007 was 45.2%, compared to 22.4% for the first quarter of 2006.

Net income for the first quarter of 2007 was $2.5 million, or $0.07 per diluted share, an increase of 125.6% compared to $1.1 million, or $0.03 per diluted share, in the first quarter of 2006. Net income in the first quarter of 2007 reflects a small adjustment to the anticipated income tax rate for future periods, resulting in a reduction of the deferred tax asset balance and a corresponding increase in the tax provision in the current period. As a result of this adjustment, the effective tax rate for the three months ended March 31, 2007 was 45.2%. The Company will benefit from a slightly lower tax rate in future periods. Excluding the impact of this unfavorable adjustment, first quarter 2007 net income would have been $2.7 million, or $0.08 per share. Net income in the first quarter of 2006 included a favorable adjustment of $0.2 million to the deferred tax liability.

Headcount as of March 31, 2007 was 171, compared to 189 as of March 31, 2006.

Trading Volume

For the first quarter of 2007, total trading volume increased 23.6% to a record $104.4 billion, compared to $84.5 billion in the first quarter of 2006. U.S. high-grade trading volume was a record $60.8 billion in the first quarter of 2007, a 32.4% increase compared to first quarter 2006 volume of $45.9 billion. U.S. high-grade volume as a percentage of TRACE trading volume increased to an estimated 9.4% in the first quarter of 2007, up from an estimated 7.6% in the first quarter of 2006. Total TRACE volume in the first quarter of 2007 increased 7.8% to $649.3 billion, compared to $602.3 billion in the first quarter of 2006. Total U.S. high-grade trading volume for the first quarter of 2007 includes single-dealer inquiries of $4.9 billion. European high-grade trading volumes in the first quarter of 2007 increased 18.2% to a record $28.3 billion, compared to $24.0 billion in the first quarter of 2006. Other trading volumes increased 4.8% to a record $15.3 billion, compared to $14.6 billion in the first quarter of 2006.

Balance Sheet Data

As of March 31, 2007, total assets were $192.8 million, which included $112.7 million in cash, cash equivalents and securities, and a deferred tax asset of $44.0 million. Total assets as of December 31, 2006 were $204.3 million and included $131.0 million in cash, cash equivalents and securities and a deferred tax asset of $38.9 million. The decline in cash, cash equivalents and securities in the first quarter of 2007 reflects share repurchases of $18.5 million during the quarter. Total stockholders' equity as of March 31, 2007 was $178.8 million and book value per common share was $5.18, based on 34.5 million diluted shares outstanding.

Share Repurchases

In November 2006, the Board of Directors approved a $40 million share repurchase program. During the first quarter of 2007, the Company repurchased 1.4 million shares of its outstanding common stock at an average price of $13.22 per share, for a total expenditure of $18.5 million. A total of $18.8 million remains in the current repurchase program as of March 31, 2007.

Read the full results statement here:» Download the document now 33 kb (Adobe Acrobat Document)

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