Marketaxess Holdings, Inc. · NASDAQ:MKTX
Marketaxess — Q2 2023 Earnings Presentation
24 slides from Marketaxess's earnings presentation, Jul 20, 2023
Slide 1: Q2 2023 Conference Call and Webcast
Q2 2023 Conference Call and Webcast July 20, 2023
Slide 2: Strategic Update and Outlook: Driving Better Trading Outcomes for Clients
Strategic Update and Outlook: Driving Better Trading Outcomes for Clients ❖ Chris Concannon, CEO 2
Slide 3: 2Q23 – Enhancing Trading Outcomes For Our Clients
2Q23 – Enhancing Trading Outcomes For Our Clients1 Next Gen Data Products Helping Traders Determine What, How and When, and Who to Trade With. • Developed AI-powered proprietary data to build best in class pricing and trading signals. • Strong adoption of Composite+ which is powering our automation
Slide 4: Innovate – Proprietary Data Powering New Trading Platform
Innovate – Proprietary Data Powering New Trading Platform Enriched Next Gen RAW DATA Data and New Trading Platform Data1 Insights Matchability Tradability WHAT TO TRADE CP+™ Liquidity Score Portfolio Construction Like Bonds HOW & WHEN TO TRADE Automation/High Touch/Direct/PT vs. List Tradability WHO
Slide 5: Integrate – Order Centric Workflow Helping Clients Make Better Trading Decisions
Integrate – Order Centric Workflow Helping Clients Make Better Trading Decisions The New Trading Platform Combining our connectivity solutions with advanced AI and machine learning to direct client orders to the best trading solution Portfolio Trade High Block Solution Touch Request for Market Adapt
Slide 6: Innovate – Linking Our Differentiated Open Trading Liquidity Pools
Innovate – Linking Our Differentiated Open Trading Liquidity Pools New Client Algorithms Auto-X Responder Unique MKTX Live Markets Data Auto-X RFQ Auto-X MarketAxess Rules Axes Ecosystem Engine Inventory Adaptive Proprietary Trading Auto-X Signals Auctions Dealer Streams 6
Slide 7: Execute – Capturing Our Expanded Addressable Market
Execute – Capturing Our Expanded Addressable Market 2018 ESTIMATED CURRENT ESTIMATED REVENUE OPPORTUNITY1 REVENUE OPPORTUNITY Market Volume Growth New Product $4 Expansion $7 Billion Billion Acquisitions New Protocols / Workflows CORE PRODUCT SET EXPANDED REVENUE U.S. High Grade NEW PROTOCOLS / OPPO
Slide 8: Market Conditions & Outlook
Market Conditions & Outlook HIGH-GRADE AND HIGH-YIELD SPREAD RANGES VOLATILITY INDEX (VIX) AND HIGH-YIELD ETF High-Grade Spread Range High-Yield Spread Range High-Grade Spread Range Avg. High-Yield Spread Range Avg. NOTIONAL VOLUME VIX High-Yield ETF Volume 55 250 40 400 Benchmark Spreads (bps) HY E
Slide 9: Update on Our Market: How We Executed
Update on Our Market: How We Executed ❖ Rich Schiffman, Global Head of Trading Solutions 9
Slide 10: Execute – Continued Strong Expansion of the Client Network
Execute – Continued Strong Expansion of the Client Network RECORD ACTIVE CLIENT FIRMS CONTRIBUTION FROM HEDGE FUND AND PRIVATE BANK Record 2,083 Active CLIENT TRADING VOLUME Client Firms 2,200 175 Q2 YoY Growth: 36% 2,000 150 $136 3-Year CAGR: 11% Trade Volume (in $ billions) $125 # Active Client Fi
Slide 11: Execute – Accessing Our Full Ecosystem Through Automation
Execute – Accessing Our Full Ecosystem Through Automation RECORD DATA REVENUE DRIVEN BY CP+ ADOPTION RECORD AUTO-X TRADE VOLUME AND COUNT Q2 YoY Growth Trade Volume: 27% Trade Count: 38% Trade Volume Trade Count 13 80 450 12 Q2 YoY Growth: 24% $12 70 3-Year CAGR 400 Data Revenue (in $ millions) Trad
Slide 12: Execute – Leveraging Open Trading as Liquidity Destination
Execute – Leveraging Open Trading as Liquidity Destination TOTAL CREDIT OPEN TRADING VOLUME AND TOTAL CREDIT RECORD NUMBER OF HEDGE FUND CLIENTS PROVIDING OPEN TRADING SHARE1 LIQUIDITY ON OPEN TRADING Open Trading Volume Open Trading % Share # of Hedge Funds Providing Liquidity 300 40% 220 Trade Vol
Slide 13: Execute – International Diversification Enhances Our Market
Execute – International Diversification Enhances Our Market RECORD INTERNATIONAL PERCENT CONTRIBUTION TO INTERNATIONAL GROWTH IN ADV AND TRADE COUNT Q2 YoY Growth ADV: 14% ADV Trade Count: 28% International ADV International Trade Count 38% 5.0 700 3-Year CAGR International ADV Contribution (%) 36%
Slide 14: Financial Review
Financial Review ❖ Chris Gerosa, CFO 14
Slide 15: 2Q23 Financial Summary
2Q23 Financial Summary (in $ thousands, except EPS data) COMMENTARY2 2Q23 vs. • Commission revenue impacted by lower composite market volumes and Financial Results 2Q23 1Q23 2Q22 lower credit fee capture, partially offset by higher fixed distribution fees 2Q22 • Record information services revenue w
Slide 16: 2Q23 Commission Revenue Detail
2Q23 Commission Revenue Detail (in $ thousands, except transaction fees per million data) COMMENTARY1 2Q23 vs. Credit Commissions 2Q23 1Q23 2Q22 2Q22 • Reduction in credit commission revenue due to Variable Transaction Fees lower composite market volumes, fee capture and Credit 118,710 140,970 125,8
Slide 17: 2Q23 Expense Detail
2Q23 Expense Detail (in $ thousands) COMMENTARY1 • Total expenses of $104.1 million, up 7% on continued investment 2Q23 vs. Expense Summary 2Q23 1Q23 2Q22 2Q22 • Year-over-year increase in operating expenses Employee Compensation and Benefits 48,383 52,315 45,435 6.5 % due to continued investments t
Slide 18: Cash Flow and Capital Management
Cash Flow and Capital Management QUARTERLY OVERVIEW TTM FREE CASH FLOW 1 AND CAPITAL Q2 TTM FCF2 EXPENDITURES 5-Year CAGR: 8% • Total cash and investments of $506 million TTM Free Cash Flow TTM Capital Expenditures TTM Capital Expenditures (in $ millions) 350 100 TTM Free Cash Flow (in $ millions) •
Slide 19: Key Takeaways
Key Takeaways • Continued strong execution of our growth strategy despite challenging market conditions • We have launched unique proprietary data solutions and embedded them in our new platform that we believe will help our clients make better trading decisions that achieve better outcomes. • Our g
Slide 20: Appendix
>« Market Axess: Appendix
Slide 21: Reconciliation of Net Income to EBITDA and Net Income Margin to EBITDA Margin
Reconciliation of Net Income to EBITDA and Net Income Margin to EBITDA Margin Reconciliation of Net Income to EBITDA and Net YTD YTD Income Margin to EBITDA Margin 2Q23 2Q22 2Q23 2Q22 Net income $ 59,859 $ 66,922 $ 133,487 $ 131,691 Add back: Interest income (5,312) (254) (9,561) (313) Interest expe
Slide 22: Reconciliation of Cash Flows from Operating Activities to Free Cash Flow
Reconciliation of Cash Flows from Operating Activities to Free Cash Flow Reconciliation of Cash Flows from Operating YTD YTD Activities to Free Cash Flow 2Q23 2Q22 2Q23 2Q22 Cash flows from operating activities $ 105,394 $ 93,637 $ 112,921 $ 69,907 Exclude: Net change in trading investments (890) -
Slide 23: Disclosures
Disclosures ©2023 MarketAxess Holdings Inc. (the "Company"). MarketAxess Corporation is a member of FINRA and SIPC. MarketAxess Canada Company is a member of IIROC. MarketAxess Europe Limited (04017160), MarketAxess Capital Limited (09777893), and MarketAxess Post-Trade Limited (01917944) are incorp
Slide 24: Now you're in the market
\V, aN Now you're in the market™