Marketaxess Holdings, Inc. · NASDAQ:MKTX
Marketaxess — Q4 2023 Earnings Presentation
23 slides from Marketaxess's earnings presentation, Jan 31, 2024
Slide 1: Q4 & FY 2023 Conference Call and Webcast
Q4 & FY 2023 Conference Call and Webcast January 31, 2024
Slide 2: Strategic Update and Outlook
Strategic Update and Outlook ❖ Chris Concannon, CEO 2
Slide 3: 4Q23 – Areas of Focus and How We Delivered
4Q23 – Areas of Focus and How We Delivered1 Unique Data Helping Traders Achieve Better Trading Outcomes From Pre-Trade Analytics to Portfolio Construction • Strong growth in new entrants to credit (e.g. hedge funds) and increasing adoption of automated tools. • Launch of MSCI MarketAxess Tradable Co
Slide 4: Helping Traders Achieve Better Trading Outcomes
Helping Traders Achieve Better Trading Outcomes 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+ Re
Slide 5: Grow Corporate Bond Market Share – Focus in 2024
Grow Corporate Bond Market Share – Focus in 2024 2024 Key Objectives Market Opportunity Action Plan $29 Billion in U.S. High-Grade TRACE ADV • Expand Roll-Out of Increase Share of MarketAxess X-Pro Larger Sized Trades ≥ $5 million Trade Sizes ≥ $5 million • Create New Proprietary Est. 36% of Market
Slide 6: 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 MKT. VOLUME VIX High-Yield ETF Market Volume 55 250 40 390 HY ETF Notional
Slide 7: Update on Our Market
Update on Our Market ❖ 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: Strong Geographic and Product Expansion
Strong Geographic and Product Expansion INTERNATIONAL CLIENT TRADE VOLUME AND RECORD TRADE COUNT RECORD AXESS IQ (PRIVATE BANK TRADING Q4 YoY Growth Trade Volume: 67% International Trade Volume International Trade Count Q4 YoY Growth SOLUTIONS) TRADE VOLUME AND COUNT Trade Count: 75% Trade Volume: 1
Slide 10: Integrating Our Full Ecosystem Through Automation
Integrating Our Full Ecosystem Through Automation FULL-YEAR 2023 COMMENTARY RECORD AUTO-X TRADE VOLUME AND COUNT Q4 YoY Growth Trade Volume: 40% • Record ~$303 billion automation volume, up 38%; record Trade Volume Trade Count Trade Count: 41% ~2 million trade count, up 44%. 100 3-Year CAGR 600 90 T
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 Q4 YoY Growth:
Slide 12: Financial Review
Financial Review ❖ Stephen Davidson, Head of Investor Relations 12
Slide 13: 4Q23 Financial Summary
4Q23 Financial Summary (in $ thousands, except EPS data) 4Q23 vs. COMMENTARY3 Financial Results 4Q23 3Q23 4Q22 4Q22 • Commission revenue benefited from higher market volume across most product areas, the acquisition of Pragma ($5.2 million) and higher fixed Commissions $ 171,891 $ 150,496 $ 158,443
Slide 14: 4Q23 Commission Revenue Detail
4Q23 Commission Revenue Detail (in $ thousands, except transaction fees per million data) Commissions 4Q23 3Q23 4Q22 4Q23 vs. COMMENTARY2 4Q22 Variable Transaction Fees Credit Credit $ 127,283 $ 109,065 $ 120,887 5.3 % • Increase in total credit variable transaction fees principally due stronger mar
Slide 15: 4Q23 Expense Detail
4Q23 Expense Detail (in $ thousands) COMMENTARY1 4Q23 vs. Expense Summary 4Q23 3Q23 4Q22 4Q22 • Total expenses of $120.2 million, including $8.7 million impact of Pragma and $2.4 million in Employee Compensation and Benefits $ 57,356 $ 48,872 $ 44,108 30.0% acquisition-related expenses and costs ass
Slide 16: Cash Flow and Capital Management
Cash Flow and Capital Management QUARTERLY OVERVIEW TTM FREE CASH FLOW 1 AND CAPITAL Q4 TTM FCF2 EXPENDITURES 5-Year CAGR: 8% • Total cash and investments of $586 million as of TTM Free Cash Flow TTM Capital Expenditures TTM Capital Expenditures (in $ millions) December 31, 2023 350 100 TTM Free Cas
Slide 17: FY 2024 Guidance
FY 2024 Guidance1 Metric Full-Year 2024 Guidance1 Pragma Revenue Revenue from Pragma is expected to grow in the mid-single digits (%). Pragma’s revenue in 4Q23 was $7.6 million. Total Expenses/Pragma Expenses $480 million to $500 million/$33 million to $35 million (incl. amortization expense on acqu
Slide 18: Key Takeaways
Key Takeaways • We executed well in the fourth quarter and significantly enhanced the franchise. • The expected Fed “pivot” in 2024 and an improved market backdrop is supportive of our model, with investors trading higher duration bonds benefiting high-grade fee capture. • Our focus in 2024 is on gr
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 FY FY 4Q23 3Q23 4Q22 Income Margin to EBITDA Margin 2023 2022 Net income $ 69,627 $ 54,941 $ 59,226 $ 258,055 $ 250,224 Add back: Interest income (6,274) (6,590) (3,294) (22,4
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 FY FY 4Q23 3Q23 4Q22 Operating Activities to Free Cash Flow 2023 2022 Net cash provided by operating activities $ 141,685 $ 79,161 $ 134,226 $ 333,767 $ 289,231 Exclude: Net change in
Slide 22: Disclosures
Disclosures ©2024 MarketAxess Holding Inc. (the "Company"). MarketAxess Corporation and Pragma LLC are members of FINRA and SIPC. MarketAxess Canada Company is a member of the New SRO. MarketAxess Europe Limited (04017160), MarketAxess Capital Limited (09777893), and MarketAxess Post-Trade Limited (
Slide 23: Now you're in the market
\V, aN Now you're in the market™