MARKETAXESS HOLDINGS INC [MKTX] Filings

10-Q 1 mktx-20240930.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34091

MARKETAXESS HOLDINGS INC.

(Exact name of registrant as specified in its charter)


Delaware		52-2230784
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

55 Hudson Yards, 15th Floor New York, New York		10001
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 813-6000

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol

    Name of each exchange on which registered

    Common Stock, $0.003 par value

    MKTX

    NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 4, 2024, the number of shares of the Registrant’s voting common stock outstanding was 37,704,364.

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS


		Page
PART I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Financial Condition as of September 30, 2024 and December 31, 2023	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and 2023	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	47
PART II — Other Information
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


	As of
	September 30, 2024			December 31, 2023
	(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	446,347		$	451,280
Cash segregated under federal regulations		46,657			45,122
Investments, at fair value		167,213			134,861
Accounts receivable, net of allowance of $710 and $577 as of September 30, 2024 and December 31, 2023, respectively		102,760			89,839
Receivables from broker-dealers, clearing organizations and customers		474,989			687,936
Goodwill		236,706			236,706
Intangible assets, net of accumulated amortization		104,331			119,108
Furniture, equipment, leasehold improvements and capitalized software, net of accumulated depreciation and amortization		109,482			102,671
Operating lease right-of-use assets		59,998			63,045
Prepaid expenses and other assets		84,566			84,499
Total assets	$	1,833,049		$	2,015,067

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued employee compensation		52,816			60,124
Payables to broker-dealers, clearing organizations and customers		283,314			537,398
Income and other tax liabilities		2,151			7,892
Accounts payable, accrued expenses and other liabilities		33,437			37,013
Operating lease liabilities		75,077			79,677
Total liabilities	$	446,795		$	722,104

Commitments and Contingencies (Note 13)

Stockholders' equity
Preferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Common stock voting, $0.003 par value, 110,000,000 shares authorized, 41,034,858 shares and 40,940,769 shares issued and 37,724,684 shares and 37,899,688 shares outstanding as of September 30, 2024 and December 31, 2023, respectively		123			123
Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		—			—
Additional paid-in capital		344,138			333,292
Treasury stock – Common stock voting, at cost, 3,310,174 shares and 3,041,081 shares as of September 30, 2024 and December 31, 2023, respectively		(316,524	)		(260,298	)
Retained earnings		1,368,661			1,244,216
Accumulated other comprehensive loss		(10,144	)		(24,370	)
Total stockholders' equity		1,386,254			1,292,963
Total liabilities and stockholders' equity	$	1,833,049		$	2,015,067

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
	(In thousands, except per share amounts)
Revenues
Commissions	$	180,392	$	150,496	$	536,944	$	491,073
Information services		12,960		11,801		37,385		34,466
Post-trade services		10,382		9,833		31,512		29,228
Technology services		2,981		154		8,852		532
Total revenues		206,715		172,284		614,693		555,299

Expenses
Employee compensation and benefits		58,431		48,872		176,485		149,570
Depreciation and amortization		18,728		17,561		55,284		51,027
Technology and communications		18,553		15,339		53,375		45,573
Professional and consulting fees		6,989		9,181		21,053		24,331
Occupancy		3,835		3,503		10,974		10,313
Marketing and advertising		2,898		2,100		7,741		8,403
Clearing costs		4,387		3,665		13,420		12,392
General and administrative		5,839		5,154		15,467		15,698
Total expenses		119,660		105,375		353,799		317,307
Operating income		87,055		66,909		260,894		237,992
Other income (expense)
Interest income		6,953		6,590		19,327		16,151
Interest expense		(346)		(164)		(1,283)		(347)
Equity in earnings of unconsolidated affiliate		340		125		1,064		579
Other, net		(1,105)		(1,717)		(4,051)		(5,487)
Total other income (expense)		5,842		4,834		15,057		10,896
Income before income taxes		92,897		71,743		275,951		248,888
Provision for income taxes		21,408		16,802		66,909		60,460
Net income	$	71,489	$	54,941	$	209,042	$	188,428

Net income per common share
Basic	$	1.90	$	1.47	$	5.55	$	5.03
Diluted	$	1.90	$	1.46	$	5.55	$	5.01

Cash dividends declared per common share	$	0.74	$	0.72	$	2.22	$	2.16

Weighted average shares outstanding
Basic		37,527		37,491		37,641		37,485
Diluted		37,608		37,574		37,696		37,603

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024		2023			2024		2023
	(In thousands)
Net income	$	71,489	$	54,941		$	209,042	$	188,428
Cumulative translation adjustment		18,740		(9,687	)		13,936		274
Net unrealized gain (loss) on securities available-for- sale, net of tax of $20, $5, $57, and $61, respectively		343		(18	)		290		(185	)
Comprehensive income	$	90,572	$	45,236		$	223,268	$	188,517

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock Voting		Additional Paid-In Capital		Treasury Stock - Common Stock Voting		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	(In thousands, except per share amounts)
Balance at January 1, 2024	$	123	$	333,292	$	(260,298)	$	1,244,216	$	(24,370)	$	1,292,963
Net income		—		—		—		72,615		—		72,615
Cumulative translation adjustment		—		—		—		—		(4,241)		(4,241)
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		(40)		(40)
Stock-based compensation		—		7,298		—		—		—		7,298
Exercise of stock options		—		1,977		—		—		—		1,977
Withholding tax payments on full value awards vesting and stock option exercises		—		(14,893)		—		—		—		(14,893)
Reissuance of treasury stock		—		(155)		1,440		(581)		—		704
Repurchases of common stock		—		—		(10,147)		—		—		(10,147)
Cash dividend on common stock ($0.74 per share)		—		—		—		(28,003)		—		(28,003)
Balance at March 31, 2024		123		327,519		(269,005)		1,288,247		(28,651)		1,318,233
Net income		—		—		—		64,938		—		64,938
Cumulative translation adjustment		—		—		—		—		(563)		(563)
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		(13)		(13)
Stock-based compensation		—		8,328		—		—		—		8,328
Withholding tax payments on full value awards vesting and stock option exercises		—		(206)		—		—		—		(206)
Repurchases of common stock		—		—		(33,450)		—		—		(33,450)
Cash dividend on common stock ($0.74 per share)		—		—		—		(28,046)		—		(28,046)
Balance at June 30, 2024		123		335,641		(302,455)		1,325,139		(29,227)		1,329,221
Net income		—		—		—		71,489		—		71,489
Cumulative translation adjustment		—		—		—		—		18,740		18,740
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		343		343
Stock-based compensation		—		8,294		—		—		—		8,294
Exercise of stock options		—		444		—		—		—		444
Withholding tax payments on full value awards vesting and stock option exercises		—		(164)		—		—		—		(164)
Reissuance of treasury stock		—		(77)		963		—		—		886
Repurchases of common stock		—		—		(15,032)		—		—		(15,032)
Cash dividend on common stock ($0.74 per share)		—		—		—		(27,967)		—		(27,967)
Balance at September 30, 2024	$	123	$	344,138	$	(316,524)	$	1,368,661	$	(10,144)	$	1,386,254

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

(Unaudited)


	Common Stock Voting		Additional Paid-In Capital		Treasury Stock - Common Stock Voting		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	(In thousands, except per share amounts)
Balance at January 1, 2023	$	123	$	345,468	$	(328,326)	$	1,101,525	$	(37,697)	$	1,081,093
Net income		—		—		—		73,628		—		73,628
Cumulative translation adjustment		—		—		—		—		5,755		5,755
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		(41)		(41)
Stock-based compensation		—		7,488		—		—		—		7,488
Reissuance of treasury stock		—		(57)		511		—		—		454
Exercise of stock options		—		707		—		—		—		707
Withholding tax payments on full value awards vesting and stock option exercises		—		(20,492)		—		—		—		(20,492)
Cash dividend on common stock ($0.72 per share)		—		—		—		(27,060)		—		(27,060)
Balance at March 31, 2023		123		333,114		(327,815)		1,148,093		(31,983)		1,121,532
Net income		—		—		—		59,859		—		59,859
Cumulative translation adjustment		—		—		—		—		4,206		4,206
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		(126)		(126)
Stock-based compensation		—		6,890		—		—		—		6,890
Exercise of stock options		—		18		—		—		—		18
Withholding tax payments on full value awards vesting and stock option exercises		—		(155)		—		—		—		(155)
Cash dividend on common stock ($0.72 per share)		—		—		—		(27,132)		—		(27,132)
Balance at June 30, 2023		123		339,867		(327,815)		1,180,820		(27,903)		1,165,092
Net income		—		—		—		54,941		—		54,941
Cumulative translation adjustment		—		—		—		—		(9,687)		(9,687)
Unrealized net gain (loss) on securities available-for-sale, net of tax		—		—		—		—		(18)		(18)
Stock-based compensation		—		7,481		—		—		—		7,481
Withholding tax payments on full value awards vesting and stock option exercises		—		(216)		—		—		—		(216)
Reissuance of treasury stock		—		(185)		724		—		—		539
Cash dividend on common stock ($0.72 per share)		—		—		—		(27,154)		—		(27,154)
Balance at September 30, 2023	$	123	$	346,947	$	(327,091)	$	1,208,607	$	(37,608)	$	1,190,978

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2024			2023
	(In thousands)
Cash flows from operating activities
Net income	$	209,042		$	188,428
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		55,284			51,027
Amortization of operating lease right-of-use assets		5,025			4,207
Stock-based compensation expense		23,065			21,859
Deferred taxes		(1,823	)		(5,502	)
Foreign currency transaction losses		5,795			1,587
Other		(2,839	)		847
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(11,677	)		(11,650	)
Decrease/(increase) in receivables from broker-dealers, clearing organizations and customers		208,520			(46,146	)
Decrease/(increase) in prepaid expenses and other assets		3,203			(18,240	)
(Increase) in trading investments		(629	)		(24,300	)
(Increase) in mutual funds held in rabbi trust		(583	)		(206	)
(Decrease) in accrued employee compensation		(7,795	)		(12,406	)
(Decrease)/increase in payables to broker-dealers, clearing organizations and customers		(261,718	)		58,710
(Decrease) in income and other tax liabilities		(5,150	)		(3,921	)
(Decrease) in accounts payable, accrued expenses and other liabilities		(2,085	)		(7,491	)
(Decrease) in operating lease liabilities		(6,646	)		(4,721	)
Net cash provided by operating activities		208,989			192,082
Cash flows from investing activities
Available-for-sale investments
Proceeds from maturities and sales		8,995			3,311
Purchases		(38,746	)		(27,871	)
Purchases of furniture, equipment and leasehold improvements		(9,727	)		(7,255	)
Capitalization of software development costs		(35,790	)		(31,802	)
Net cash (used in) investing activities		(75,268	)		(63,617	)
Cash flows from financing activities
Cash dividends on common stock		(84,999	)		(82,139	)
Exercise of stock options		2,421			725
Withholding tax payments on full value awards vesting and stock option exercises		(15,263	)		(20,863	)
Repurchases of common stock		(58,629	)		—
Payment of contingent consideration		—			(12,500	)
Proceeds from short-term borrowings		344,925			53,995
Repayments of short-term borrowings		(344,925	)		(50,000	)
Net cash (used in) financing activities		(156,470	)		(110,782	)
Effect of exchange rate changes on cash and cash equivalents		11,082			(1,451	)
Cash and cash equivalents including restricted cash
Net increase for the period		(11,667	)		16,232
Beginning of period		611,672			572,664
End of period	$	600,005		$	588,896

Supplemental cash flow information
Cash paid for income taxes	$	76,044		$	83,142
Cash paid for interest		1,399			396
Non-cash investing and financing activity
Operating lease right-of-use assets obtained in exchange for operating lease liabilities		1,647			1,178
Furniture, equipment, software and leasehold improvement additions included in accounts payable		646			—
Stock-based and accrued incentive compensation relating to capitalized software development costs		3,885			—
Exercise of stock options - cashless		1,735			—

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Principal Business Activity

MarketAxess Holdings Inc. (the “Company” or “MarketAxess”) was incorporated in the State of Delaware on April 11, 2000. Through its subsidiaries, MarketAxess operates leading electronic trading platforms delivering expanded liquidity opportunities, improved execution quality and significant cost savings across global fixed-income markets. Over 2,000 institutional investor and broker-dealer firms are active users of MarketAxess’ patented trading technology, accessing global liquidity on its platforms in U.S. high-grade bonds, U.S. high-yield bonds, emerging market debt, Eurobonds, municipal bonds, U.S. government bonds and other fixed-income securities. Through its Open Trading® protocols, MarketAxess executes bond trades between and among institutional investor and broker-dealer clients in the leading all-to-all anonymous trading environment for corporate bonds. MarketAxess also offers a number of trading-related products and services, including: CP+™ pricing and other market data products to assist clients with trading decisions; auto-execution and other execution services for clients requiring specialized workflow solutions; connectivity solutions that facilitate straight-through processing; and technology services to optimize trading environments. The Company also provides a range of pre- and post-trade services, including post-trade matching, trade publication, regulatory transaction reporting and market and reference data across a range of fixed-income and other products.

2. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated. These consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The consolidated financial information as of December 31, 2023 has been derived from audited financial statements not included herein. These unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) with respect to Form 10-Q and reflect all adjustments that, in the opinion of management, are normal and recurring, and that are necessary for a fair statement of the results for the interim periods presented. In accordance with such rules and regulations, certain disclosures that are normally included in annual financial statements have been omitted. Interim period operating results may not be indicative of the operating results for a full year.

Cash and Cash Equivalents

The Company defines cash equivalents as short-term interest-bearing investments with maturities at the time of purchase of three months or less.

Investments

The Company determines the appropriate classification of securities at the time of purchase which are recorded in the Consolidated Statements of Financial Condition on the trade date. Securities are classified as available-for-sale or trading. Available-for-sale investments are carried at fair value with unrealized gains or losses reported in accumulated other comprehensive loss in the Consolidated Statements of Financial Condition and realized gains or losses reported in other, net in the Consolidated Statements of Operations. Trading investments and securities sold, not yet purchased include U.S. Treasuries and are carried at fair value, with realized and unrealized gains or losses included in other, net in the Consolidated Statements of Operations.

The Company assesses whether an impairment loss on its available-for-sale debt securities has occurred due to declines in fair value or other market conditions. When the amortized cost basis of an available-for-sale debt security exceeds its fair value, the security is deemed to be impaired. The portion of an impairment related to credit losses is determined by comparing the present value of cash flows expected to be collected from the security with the amortized cost basis of the security and is recorded as a charge in the Consolidated Statements of Operations. The remainder of an impairment is recognized in accumulated other comprehensive loss if the Company does not intend to sell the security and it is more likely than not that the Company will not be required to sell the security prior to recovery.

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Fair Value Financial Instruments

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” A three-tiered hierarchy for determining fair value has been established that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as Level 1 (unadjusted quoted prices for identical assets or liabilities in active markets), Level 2 (inputs that are observable in the marketplace other than those inputs classified in Level 1) and Level 3 (inputs that are unobservable in the marketplace). The Company’s financial assets and liabilities measured at fair value on a recurring basis consist of its money market funds, trading securities, available-for-sale securities, foreign currency forward contracts and securities sold, not yet purchased. All other financial instruments are short-term in nature and the carrying amounts reported on the Consolidated Statements of Financial Condition approximate fair value.

Receivables from and Payables to Broker-dealers, Clearing Organizations and Customers