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MarketAxess Q3 net income soars

31 October 2007  |  1680 views  |  0 Source: MarketAxess

MarketAxess Holdings (Nasdaq: 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 third quarter ended September 30, 2007.

Total revenues for the third quarter of 2007 increased 6.9% to $22.2 million, compared to $20.8 million in the third quarter of 2006. Pre-tax income for the third quarter of 2007 was $3.6 million, an increase of 63.4% compared to $2.2 million in the third quarter of 2006. Net income in the third quarter of 2007 totaled $2.4 million, or $0.07 per share on a diluted basis, an increase of 85.8% compared to $1.3 million, or $0.04 per share on a diluted basis, in the third quarter of 2006.

Pre-tax margin in the third quarter of 2007 was 16.4%, compared to 10.7% in the third quarter of 2006.

Richard M. McVey, chairman and chief executive officer of MarketAxess, commented, "Platform trading volumes in the third quarter were negatively impacted by the severe and widespread dislocation in the credit markets during the period. Despite this shock to the market and the temporary migration of trading to the telephone, we recorded our third highest quarter for total revenue generation, driven in part by the first full quarter's impact of our new European high-grade fee plan. Furthermore, our continued focus on expense discipline drove incremental margins higher, reflecting the strong operating leverage and free cash flow generation in our business model."

Third Quarter Results

Total revenues for the third quarter of 2007 increased 6.9% to $22.2 million, compared to $20.8 million in the third quarter of 2006. U.S. high- grade corporate bond commissions decreased 2.2% to $12.0 million in the third quarter of 2007, compared to $12.3 million in the third quarter of 2006. European high-grade corporate bond commissions increased 48.6% to $4.9 million in the third quarter of 2007, compared to $3.3 million in the third quarter of 2006. Other commissions increased 2.4% to $2.1 million in the third quarter of 2007. Other revenue of $3.2 million, which consists of information and user access fees, license fees, technology services fees, investment income and other revenue, was flat when compared to the third quarter of 2006.

Total expenses for the third quarter of 2007 increased 0.1% to $18.6 million, compared to $18.5 million in the third quarter of 2006. Employee compensation and benefits expense decreased 2.1% to $10.3 million, compared to $10.5 million in the third quarter of 2006 primarily due to reduced severance expense, partially offset by higher incentive compensation.

Pre-tax income in the third quarter of 2007 was $3.6 million, an increase of 63.4% compared to $2.2 million in the third quarter of 2006. Pre-tax margin was 16.4% in the third quarter of 2007, compared to 10.7% in the third quarter of 2006.

The effective tax rate for the third quarter of 2007 was 33.9%, compared to 41.8% for the third quarter of 2006. The decrease in the effective tax rate was principally attributable to an increase in foreign earnings in 2007.

Net income for the third quarter of 2007 was $2.4 million, or $0.07 per diluted share, an increase of 85.8% compared to $1.3 million, or $0.04 per diluted share, in the third quarter of 2006.

Headcount as of September 30, 2007 was 181, compared to 185 as of September 30, 2006.

Trading Volume

For the third quarter of 2007, total trading volume was $75.67 billion, a decline of 9.6% compared to $83.8 billion in the third quarter of 2006. U.S. high-grade trading volume declined 19.8% to $39.9 billion in the third quarter of 2007, compared to third quarter 2006 volume of $49.8 billion. U.S. high- grade volume as a percentage of TRACE high-grade trading volume was an estimated 7.8% in the third quarter of 2007, down from an estimated 9.3% in the third quarter of 2006. Total TRACE volume in the third quarter of 2007 decreased 4.0% to $512.7 billion, compared to $534.0 billion in the third quarter of 2006. Total U.S. high-grade trading volume for the third quarter of 2007 includes single-dealer inquiries of $2.6 billion. European high-grade trading volume in the third quarter of 2007 was $14.7 billion, a decline of 21.3% compared to $18.7 billion in the third quarter of 2006. Other trading volume increased 37.6% to $21.0 billion, compared to $15.3 billion in the third quarter of 2006.

Balance Sheet Data

As of September 30, 2007, total assets were $198.4 million, which included $127.8 million in cash, cash equivalents and securities, and a deferred tax asset of $36.6 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. Total stockholders' equity as of September 30, 2007 was $176.3 million and book value per common share was $5.10, based on 34.6 million diluted shares outstanding.

Share Repurchases

In November 2006, the Board of Directors approved a $40.0 million share repurchase program. During the third quarter of 2007, the Company repurchased 0.2 million shares of its outstanding common stock at an average price of $17.18 per share, for a total expenditure of $3.5 million. A total of $10.0 million remains in the current repurchase program as of September 30, 2007.

Read the consolidated statements of operations here:» Download the document now 33 kb (PDF File)

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