For the first quarter of 2006, total revenue was $20.3 million compared to $21.3 million in 2005. Net income for the first quarter of 2006 was $1.1 million, or $0.03 per diluted share, compared to $3.1 million, or $0.09 per diluted share in the first quarter of 2005. First quarter 2006 net income includes the impact of $0.7 million of stock option costs from the implementation of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (SFAS 123R).

"While our short-term financial results are disappointing, we are encouraged by the continued increase in the client and product breadth on the MarketAxess trading system. Specific signs of growth include an 18% increase in active clients, positive volume trends in new product areas, and a record quarter for European and other volumes," commented Richard M. McVey, Chairman and Chief Executive Officer of MarketAxess. "This business expansion allowed MarketAxess to achieve our second best quarter ever in total revenues in spite of a 15% year-on-year drop in NASD TRACE high-grade volumes. Our confidence in the future of electronic trading for fixed income markets guides our strategy to continue investing in new capabilities to maximize long-term value for our stockholders."

First Quarter Results

Total revenues for the first quarter of 2006 declined 4.5% to $20.3 million, compared to $21.3 million in the first quarter of 2005. U.S. high- grade corporate bond commissions totaled $11.0 million in the first quarter of 2006, a decrease of 11.9% compared to $12.5 million in the first quarter of 2005. European high-grade corporate bond commissions totaled $4.3 million in the first quarter of 2006, a decrease of 1.4% compared to $4.4 million in the first quarter of 2005. Other commissions increased 22.3% in the first quarter of 2006 to $2.1 million, compared to $1.7 million in the first quarter of 2005. Other revenue, which consists of information and user access fees, license fees, investment income and other revenue, increased 7.5% to $2.9 million in the first quarter of 2006 compared to $2.7 million in the first quarter of 2005 due to higher interest income and an increase in fees from our Corporate BondTicker(TM) service, partially offset by a decrease in license fees.

Total expenses for the first quarter of 2006 increased 18.9% to $18.9 million, compared to $15.9 million in the first quarter of 2005. In accordance with SFAS 123R, the Company is required to expense the cost of stock-based compensation using a fair value method. Employee compensation and benefits expenses increased 11.2% to $10.3 million compared to $9.2 million in the first quarter of 2005. The $1.0 million increase in compensation and benefits expense includes $0.7 million of stock option costs related to the implementation of SFAS 123R in the first quarter of 2006. General and administrative expenses increased 52.8% to $2.0 million compared to $1.3 million in the first quarter of 2005 due to increased occupancy and Board of Directors related expenses as well as an increase in UK value-added taxes (VAT). Professional and consulting expenses increased 34.7% to $2.6 million compared to $1.9 million primarily due to increased audit and tax fees.

Pre-tax income in the first quarter of 2006 was $1.4 million compared to $5.4 million in 2005. Operating margin was 7% in the first quarter of 2006 compared to 25% in the first quarter of 2005.

Net income for the first quarter of 2006 was $1.1 million, or $0.03 per diluted share, compared to $3.1 million, or $0.09 per diluted share, in the first quarter of 2005.

The tax provision for the first quarter of 2006 included an adjustment of $0.2 million for an over-accrual of taxes in the prior year fourth quarter.

Headcount as of March 31, 2006 was 189 compared to 173 as of March 31, 2005.

Trading Volume

For the first quarter ended March 31, 2006, total trading volume declined 5.2% to $84.5 billion compared to $89.2 billion in the first quarter of 2005. U.S. high-grade trading volume totaled $45.9 billion in the first quarter of 2006, a 16.1% decrease compared to 2005 first quarter volume of $54.8 billion. U.S. high-grade volume as a percentage of NASD high-grade TRACE was 7.6% in the first quarter 2006. Total U.S. high-grade trading volume for the first quarter of 2006 includes single-dealer inquiries of $5.3 billion. European high-grade trading volumes in the first quarter of 2006 increased 4.7% to a record $24.0 billion, compared to $22.9 billion in the first quarter of 2005. Other trading volume, which includes emerging markets, credit default swaps, high yield, agencies and new issues, increased 26.6% to a record $14.6 billion, compared to $11.5 billion in the first quarter of 2005.

Balance Sheet Data

As of March 31, 2006, total assets were $185.5 million and included $112.2 million in cash, cash equivalents and securities and a deferred tax asset of $40.3 million. Total stockholders' equity as of March 31, 2006 was $175.2 million and book value per common share was $4.91 based on 35.7 million diluted shares outstanding.Download the document now 35.9 kb (Adobe Acrobat Document)