Marketaxess Holdings, Inc. · NASDAQ:MKTX
Marketaxess — Q3 2023 Earnings Presentation
23 slides from Marketaxess's earnings presentation, Oct 25, 2023
Slide 1: Q3 2023 Conference Call and Webcast
Q3 2023 Conference Call and Webcast October 25, 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: 3Q23 – Enhancing Trading Outcomes For Our Clients
3Q23 – Enhancing Trading Outcomes For Our Clients1 Unique Data Helping Traders Achieve Better Trading Outcomes with Pre-Trade Analytics & Ease of Workflow • X-Pro enhancing daily trader workflows and increasing efficiency. • Continued strong adoption of CP+™ which is powering our automation tools. I
Slide 4: Proprietary Data/AI Powering New Trading Platform
Proprietary Data/AI Powering New Trading Platform Enriched Proprietary X-Pro – Our Helping Traders Do Raw Data Data and Next Gen New Trading More With Insights Data1 Platform Less Matchability Tradability Bonds/Portfolio CP+™ Liquidity Score Selection Like Bonds Protocol Optimization Axess All® CP+
Slide 5: Expanding our Addressable Market from ~$4bn to ~$7bn
Expanding our Addressable Market from ~$4bn to ~$7bn (in $ billions) Acquisition of Pragma Expected to Accelerate Our Growth Strategy $ 0.9 bn $ 7.2 bn Non-Commission Data/Post- $ 0.9 bn Trade Data/Post-Trade $ 1.4 bn Rates + AI Valuation and Pricing (organic) U.S. Treasuries Rates Munis (acquisitio
Slide 6: Market Conditions & Outlook
Market Conditions & Outlook HIGH-GRADE AND HIGH-YIELD SPREAD RANGES VOLATILITY INDEX (VIX) AND HIGH-YIELD MARKET ETF High-Grade Spread Range High-Yield Spread Range NOTIONAL ADV High-Grade Spread Range Avg. High-Yield Spread Range Avg. VIX High-Yield Market ETF Notional ADV 40 12 HY Market ETF Notio
Slide 7: Update on Our Market: X-Pro, Data & Automation
Update on Our Market: X-Pro, Data & Automation: Key to Driving Higher Levels of Growth ❖ Rich Schiffman, Global Head of Trading Solutions 7
Slide 8: Continued Strong Expansion of the Client Network
Continued Strong Expansion of the Client Network RECORD ACTIVE, INTERNATIONAL AND CLIENT FIRMS TRADING RECORD PERCENT CONTRIBUTION FROM HEDGE FUND AND 3 OR MORE PRODUCTS PRIVATE BANK CLIENTS TO TOTAL CREDIT TRADING VOLUME Active Intl. Clients Active Clients Trading 3 or More Products Total Active Cl
Slide 9: International Diversification Enhances Our Market
International Diversification Enhances Our Market Q3 YoY Growth INTERNATIONAL PERCENT CONTRIBUTION TO ADV Q3 YoY Growth: INTERNATIONAL GROWTH IN ADV AND TRADE COUNT ADV: 15% +430 bps Trade Count: 21% International ADV International Trade Count 38% 5.0 700 3-Year CAGR International ADV Contribution (
Slide 10: Integrating Our Full Ecosystem Through Automation
Integrating Our Full Ecosystem Through Automation RECORD DATA REVENUE DRIVEN BY CP+ ADOPTION RECORD AUTO-X TRADE VOLUME AND COUNT Q3 YoY Growth Trade Volume: 46% Trade Count: 55% Trade Volume Trade Count 13 80 500 Q3 YoY Growth: 22% 3-Year CAGR 450 12 70 Data Revenue (in $ millions) Trade Volume (in
Slide 11: Leveraging Open Trading as a Liquidity Destination
Leveraging Open Trading as a Liquidity Destination TOTAL CREDIT OPEN TRADING VOLUME AND TOTAL RECORD NUMBER OF HEDGE FUND CLIENTS PROVIDING CREDIT OPEN TRADING SHARE1 LIQUIDITY ON OPEN TRADING Open Trading Volume Open Trading % Share # of Hedge Funds Providing Liquidity 300 40% 220 Q3 YoY Growth: 13
Slide 12: Financial Review
Financial Review ❖ Chris Gerosa, CFO 12
Slide 13: 3Q23 Financial Summary
3Q23 Financial Summary (in $ thousands, except EPS data) COMMENTARY3 Financial Results 3Q23 2Q23 3Q22 3Q23 vs. • Commission revenue impacted by lower estimated U.S. 3Q22 credit market share and lower credit fee capture, partially Commissions $ 150,496 $ 158,586 $ 153,164 (1.7)% offset by higher fixe
Slide 14: 3Q23 Commission Revenue Detail
3Q23 Commission Revenue Detail (in $ thousands, except transaction fees per million data) COMMENTARY1 3Q23 vs. Credit Commissions 3Q23 2Q23 3Q22 3Q22 • Reduction in credit transaction fees principally due Variable Transaction Fees to lower U.S. credit estimated market share and Credit $ 109,065 $ 11
Slide 15: 3Q23 Expense Detail
3Q23 Expense Detail (in $ thousands) COMMENTARY1 • Total expenses of $105.4 million, up 10%; up 8% excluding the impact of foreign currency 3Q23 vs. Expense Summary 3Q23 2Q23 3Q22 3Q22 fluctuations Employee Compensation and Benefits $ 48,872 $ 48,383 $ 44,805 9.1% • Year-over-year increase in operat
Slide 16: FY 2023 Expense Guidance
FY 2023 Expense Guidance • The Company is refining its previously stated full-year 2023 expense guidance range of $418.0 million to $446.0 million, to a new range of $432.0 million to $438.0 million. – The new range includes an estimated $12.5 million of M&A related expenses, including $8.5 million
Slide 17: Cash Flow and Capital Management
Cash Flow and Capital Management QUARTERLY OVERVIEW TTM FREE CASH FLOW 1 AND CAPITAL Q3 TTM FCF2 EXPENDITURES 5-Year CAGR: 8% • Total cash and investments of $553 million; closing of TTM Free Cash Flow TTM Capital Expenditures TTM Capital Expenditures (in $ millions) Pragma acquisition (Oct. 2, 2023
Slide 18: Key Takeaways
Key Takeaways • We continue to make strong progress in executing our growth strategy. • Volatility increased at the end of September 2023 and has continued driving higher levels of ETF market maker activity in U.S. high-yield in October. • Our client network has never been stronger, with continued d
Slide 19: Appendix
>« Market Axess: Appendix
Slide 20: 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 3Q23 3Q22 Income Margin to EBITDA Margin 2023 2022 Net income $ 54,941 $ 59,307 $ 188,428 $ 190,998 Add back: Interest income (6,590) (1,433) (16,151) (1,746) Interest
Slide 21: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Reconciliation of Net Cash Provided by YTD YTD 3Q23 3Q22 Operating Activities to Free Cash Flow 2023 2022 Net cash provided by operating activities $ 79,161 $ 85,098 $ 192,082 $ 155,005 Exclude: Net change in trading inves
Slide 22: 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 23: Now you're in the market
\Y, oN Now you're in the market”