MarketAxess Holdings Inc.(NASDAQ:MKTX), the operator of a leading electronic trading platform for U.S. and European high-grade corporate and emerging markets bonds, today announced results for the fourth quarter and full year ended December 31, 2004.
Total revenues for the fourth quarter of 2004 increased 14% to $19.7 million, compared to $17.3 million in the fourth quarter of 2003. Net income in the fourth quarter of 2004 rose 55% to $2.6 million, or $0.08 per diluted share, from $1.7 million in the fourth quarter of 2003. Excluding a one-time additional tax provision of $0.3 million, fourth quarter 2004 pro forma net income was $2.9 million, or $0.09 per diluted share. Operating margin, defined as pre-tax income as a percentage of total revenues, was 26% in the fourth quarter of 2004, compared to 11% in the fourth quarter of 2003.
For the year ended December 31, 2004, total revenues rose 30% to $75.8 million from $58.5 million for the year ended December 31, 2003. Net income increased to $58.6 million, or $1.91 per diluted share, from net income of $4.2 million for the full year 2003. Of the $58.6 million of net income in 2004, $48.2 million resulted from the recognition of an income tax benefit relating to the utilisation of prior years' net operating loss carryforwards. The operating margin for 2004 was 23%, compared to 8% in 2003.
Richard McVey, Chairman and Chief Executive Officer of MarketAxess, commented: "MarketAxess significantly strengthened its leadership position in 2004 as electronic trading continued to gain acceptance in the credit markets. Trading volume on our platform rose 55% in 2004 despite an overall decline in trading by institutional investors in the corporate bond markets as a result of extraordinarily low volatility and narrower credit spreads. In addition, the number of active institutional investor firms trading on the MarketAxess platform increased from 432 at the end of 2003 to 539 at the end of 2004, and the number of broker-dealer clients increased from 18 to 22 over the same period."
He continued, "We are encouraged by the strong momentum in our business during the fourth quarter of 2004 and will continue to build on our leadership position in the U.S. and European high-grade corporate bond markets in 2005."
Fourth Quarter Results
U.S. high-grade corporate bond commissions totaled $11.4 million in the fourth quarter of 2004, unchanged compared to the fourth quarter of 2003, as higher trading volumes offset the effect of growth in the proportion of trades in bonds with shorter maturities, which incur lower commissions. European high-grade corporate bond commissions totaled $3.3 million in the fourth quarter of 2004, an increase of 32% compared to $2.5 million in the fourth quarter of 2003. Other commissions increased 14% in the fourth quarter of 2004 to $2.0 million, compared to $1.8 million in the fourth quarter of 2003.
Total expenses for the fourth quarter of 2004 declined 5%, to $14.6 million, compared to $15.4 million in the fourth quarter of 2003, benefiting from the end of a warrant program in February 2004 that accounted for $2.1 million of expenses in the fourth quarter of 2003 and a $0.9 million decrease in general and administrative expenses compared to the fourth quarter of 2003.
Pre-tax income totaled $5.1 million for the fourth quarter of 2004, compared to $1.9 million in the fourth quarter of 2003.
Pro forma net income for the fourth quarter of 2004, prior to a non- recurring tax provision of $0.3 million, was $2.9 million, or $0.09 per diluted share, compared to $1.7 million in the fourth quarter of 2003. Including the one-time additional tax provision of $0.3 million, net income for the fourth quarter of 2004 was $2.6 million, or $0.08 per diluted share.
Full Year 2004 Results
U.S. high-grade corporate bond commissions totaled $45.5 million in 2004, compared to $40.3 million in 2003, a 13% increase. European high-grade corporate bond commissions increased 112% to $15.1 million in 2004, compared to $7.1 million in 2003. Other commissions increased 41% to $7.6 million in 2004, compared to $5.4 million in 2003.
Total expenses for 2004 increased 8% to $58.5 million, compared to $54.1 million in 2003.
Pre-tax income in 2004 totaled $17.3 million, compared to $4.4 million in 2003.
Net income for 2004 was $58.6 million, or $1.91 per diluted share, with $48.2 million of this amount attributable to the recognition of an income tax benefit relating to the utilization of prior years' net operating loss carryforwards.
Balance Sheet Data
As of December 31, 2004, total assets were $176.7 million, including $103.4 million in cash and short-term investments and $41.4 million in deferred tax assets. The number of fully diluted shares outstanding on a weighted-average basis (used for EPS calculations) was 30.6 million for the year ending December 31, 2004 and 32.8 million for the fourth quarter of 2004. Total stockholders' equity was $156.3 million as of December 31, 2004.
Trading Volume
Total trading volumes in the fourth quarter of 2004 increased 25% to $79.3 billion, compared to $63.2 billion in the fourth quarter of 2003. U.S. high-grade trading volume totaled $49.4 billion in the fourth quarter, a 12% increase over 2003 fourth quarter volume of $44.0 billion. European high-grade trading volumes in the fourth quarter of 2004 increased 37% to $16.9 billion, compared to $12.3 billion in the fourth quarter of 2003. Other trading volumes in the fourth quarter of 2004 increased 90% to $12.9 billion, from $6.8 billion in the fourth quarter of 2003.
Total trading volumes in 2004 increased 55% to $298.1 billion, compared to $192.2 billion in 2003. U.S. high-grade corporate bond trading volume totaled $183.5 billion in 2004, a 31% increase from $140.3 billion in 2003. European high-grade corporate bond trading volumes for the full year 2004 rose 141% to $76.5 billion, compared to $31.8 billion in the prior year. Other trading volumes totaled $38.1 billion in 2004, an 89% increase over the prior year's total of $20.1 billion.
Outlook for 2005
The Company expects total expenses for 2005 to increase 11% to 16% over 2004 levels.
The Company expects its full-year 2005 capital spending to be $7.0 million to $9.0 million.
The Company expects the number of fully diluted shares outstanding for the first quarter of 2005 to be in the range of 35.5 million to 36.0 million shares under the treasury stock method including shares of non-voting common stock and shares issuable upon the exercise of options and warrants.