"We are pleased to report another solid quarter with record revenues and pre-tax income, driven by continued momentum in our core U.S. high-grade business and strong growth in high yield and emerging markets," said Richard M. McVey, chairman and chief executive of MarketAxess. "Our Open Trading initiatives continue to gain traction and yesterday we announced a strategic alliance with BlackRock that we think will help drive liquidity in the credit markets by facilitating trade flow between users of BlackRock's Aladdin enterprise investment system and the MarketAxess trading community. In Europe, we completed our acquisition of Xtrakter Limited earlier in the quarter and we are excited about the opportunities presented by the combination of the two companies."

First Quarter Results

Total revenues for the first quarter of 2013 increased 9.5% to a record $55.6 million, compared to $50.7 million for the first quarter of 2012. Pre-tax income was a record $24.3 million, compared to $22.7 million for the first quarter of 2012, an increase of 6.9%. Pre-tax margin was 43.8%, compared to 44.8% for the first quarter of 2012. Net income totaled $15.3 million, or $0.41 per share on a diluted basis, compared to $13.5 million, or $0.35 per share on a diluted basis, for the first quarter of 2012.

Commission revenue for the first quarter of 2013 totaled $47.2 million on total trading volume of $160.4 billion, compared to $44.9 million in commission revenue on total trading volume of $158.0 billion for the first quarter of 2012. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 12.3%, compared to an estimated 11.4% for the first quarter of 2012.

All other revenue, which consists of technology products and services, information and post-trade services, investment income and other revenue, increased 43.5% to $8.4 million, compared to $5.8 million for the first quarter of 2012. The increase in all other revenue was principally due to information and post-trade services revenue generated by Xtrakter Limited ("Xtrakter") totaling $1.9 million since the February 28, 2013 acquisition date.

Total expenses for the first quarter of 2013 increased 11.6% to $31.2 million, compared to $28.0 million for the first quarter of 2012. The increase in total expenses was principally due to approximately $1.7 million of Xtrakter operating expenses and an additional $1.4 million of acquisition-related costs incurred during the first quarter of 2013. Excluding Xtrakter operating expenses and acquisition-related costs, total expenses increased less than 1% from the first quarter of 2012.

The effective tax rate for the first quarter of 2013 was 37.0%, compared to 40.7% for the first quarter of 2012. The first quarter 2013 income tax provision includes a benefit for certain 2012 tax credits enacted into law in 2013 amounting to approximately $0.4 million, or $0.01 per diluted share.

Employee headcount as of March 31, 2013 was 306, compared to 238 as of March 31, 2012. The March 31, 2013 headcount includes 62 Xtrakter personnel.

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 May 23, 2013 to stockholders of record as of the close of business on May 9, 2013.

Balance Sheet Data

As of March 31, 2013, total assets were $282.9 million and included $143.0 million in cash, cash equivalents and securities available-for-sale. Total stockholders' equity as of March 31, 2013 was $252.5 million. 

Guidance for 2013

The Company is updating its full year 2013 expense and capital spending guidance to reflect the impact of the acquisition of Xtrakter. The Company now expects total expenses for 2013 will be in the range of $137.0 million to $143.0 million, up from the original guidance of $118.0 million to $123.0 million. The Company also expects total capital spending for 2013 will be in the range of $15.0 million to $18.0 million, up from the original guidance of $10.0 million to $13.0 million. The Company is reconfirming its effective tax rate guidance for 2013 ranging from 38% to 40%.