MarketAxess Holdings (Nasdaq:MKTX), the operator of a leading electronic trading platform for US 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, 2010.
"Our record revenue and earnings results reflect strong momentum in our core e-trading product areas and disciplined expense management," said Richard M. McVey, chairman and chief executive officer of MarketAxess. "Operating margins continue to grow and we are investing actively in the new OTC derivative opportunities that are emerging as part of financial market regulatory reform."
Third Quarter Results
Total revenues for the third quarter of 2010 increased 24.7% to $37.4 million, compared to $30.0 million for the third quarter of 2009. Pre-tax income was a record $13.5 million, compared to $8.5 million for the third quarter of 2009, an increase of 58.3%. Pre-tax margin was 36.1%, compared to 28.5% for the third quarter of 2009. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter of 2010 was $15.1 million, compared to $10.2 million for the third quarter of 2009, an increase of 47.9%. Net income totaled $8.6 million, or $0.22 per share on a diluted basis, compared to $4.6 million, or $0.12 per share on a diluted basis, for the third quarter of 2009.
Commission revenue for the third quarter of 2010 totaled $31.2 million on total trading volume of $100.5 billion, compared to $25.3 million in commission revenue on total trading volume of $80.4 billion for the third quarter of 2009. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 8.3%, compared to an estimated 6.5% for the third quarter of 2009.
Technology products and services revenue, which includes revenue for technology licenses, support and professional services, totaled $3.5 million for the third quarter of 2010, compared to $2.6 million for the third quarter of 2009. Other revenue, which consists of information and user access fees, investment income and other revenue, increased 32.4% to $2.8 million, compared to $2.1 million for the third quarter of 2009.
Total expenses for the third quarter of 2010 increased 11.3% to $23.9 million, compared to $21.5 million for the third quarter of 2009. The majority of the increase was due to higher employee compensation and benefits expense of $1.2 million.
The effective tax rate for the third quarter of 2010 was 36.3%, compared to 45.7% for the third quarter of 2009. The 2010 effective tax rate reflects a refinement in the state and local tax apportionment methodology, which resulted in a lower projected state income tax rate. Also, the 2009 tax expense was negatively impacted by certain newly enacted apportionment rules in New York City.
Employee headcount as of September 30, 2010 was 223, compared to 210 as of September 30, 2009.
The Company's board of directors declared a quarterly cash dividend of $0.07 per share of common stock outstanding or issuable upon conversion of outstanding shares of non-voting common stock and Series B preferred stock, to be paid on November 23, 2010, to stockholders of record as of the close of business on November 9, 2010.
Share Repurchase Program Update
In June 2010, the Company's board of directors approved a $30 million share repurchase program, which authorizes the Company to repurchase shares of its common stock in the open market or in privately negotiated transactions, at times and prices considered appropriate by the Company. Through September 30, 2010, a total of 1.6 million shares had been repurchased at a cost of $23.3 million.
Balance Sheet Data
As of September 30, 2010, total assets were $287.2 million and total stockholders' equity, including the Series B preferred stock, was $256.1 million. Cash, cash equivalents and securities was $183.0 million, or $4.72 per diluted share, as of September 30, 2010, compared to $187.6 million as of June 30, 2010. During the third quarter of 2010, the Company expended a total of $25.9 million in cash relating to the share repurchase program and quarterly dividend.