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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, 2022

or

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 October 24, 2022, the number of shares of the Registrant’s voting common stock outstanding was 37,636,823.

 

 

 

 


2

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

 

 

 

 

Page

 

PART I — Financial Information

 

 

Item 1.

Financial Statements (Unaudited)

 

3

 

Consolidated Statements of Financial Condition as of September 30, 2022 and December 31, 2021

 

3

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

 

4

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021

 

5

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021

 

6

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

 

8

 

Notes to Consolidated Financial Statements

 

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

42

Item 4.

Controls and Procedures

 

43

 

PART II — Other Information

 

 

Item 1.

Legal Proceedings

 

44

Item 1A.

Risk Factors

 

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

Item 3.

Defaults Upon Senior Securities

 

45

Item 4.

Mine Safety Disclosures

 

45

Item 5.

Other Information

 

45

Item 6.

Exhibits

 

45

 

 

 

 

 

 

2


 

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

 

As of

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(In thousands, except share
 and per share amounts)

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

318,699

 

 

$

506,735

 

Cash segregated under federal regulations

 

 

50,523

 

 

 

50,159

 

Investments, at fair value

 

 

33,294

 

 

 

36,078

 

Accounts receivable, net of allowance of $387 and $140 as of
    September 30, 2022 and December 31, 2021, respectively

 

 

87,550

 

 

 

63,881

 

Receivables from broker-dealers, clearing organizations and customers

 

 

584,654

 

 

 

408,346

 

Goodwill

 

 

154,789

 

 

 

154,789

 

Intangible assets, net of accumulated amortization

 

 

99,887

 

 

 

116,377

 

Furniture, equipment, leasehold improvements and capitalized software, net of
    accumulated depreciation and amortization

 

 

93,512

 

 

 

96,061

 

Operating lease right-of-use assets

 

 

66,662

 

 

 

70,960

 

Prepaid expenses and other assets

 

 

70,177

 

 

 

27,066

 

Total assets

 

$

1,559,747

 

 

$

1,530,452

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accrued employee compensation

 

$

45,217

 

 

$

59,719

 

Payables to broker-dealers, clearing organizations and customers

 

 

336,885

 

 

 

229,325

 

Income and other tax liabilities

 

 

28,257

 

 

 

40,456

 

Accounts payable, accrued expenses and other liabilities

 

 

47,362

 

 

 

71,218

 

Operating lease liabilities

 

 

83,286

 

 

 

88,425

 

Total liabilities

 

 

541,007

 

 

 

489,143

 

 

 

 

 

 

 

 

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, 2022 and December 31, 2021

 

 

 

 

 

 

Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock voting, $0.003 par value, 110,000,000 shares authorized, 40,907,433 shares and 40,911,506 shares issued and 37,636,921 shares and 37,918,956 shares outstanding as of September 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021

 

 

 

 

 

 

Additional paid-in capital

 

 

330,294

 

 

 

330,262

 

Treasury stock – Common stock voting, at cost, 3,270,512 shares and 2,992,550 shares as of September 30, 2022 and December 31, 2021, respectively

 

 

(320,252

)

 

 

(232,712

)

Retained earnings

 

 

1,068,662

 

 

 

956,966

 

Accumulated other comprehensive loss

 

 

(60,087

)

 

 

(13,330

)

Total stockholders' equity

 

 

1,018,740

 

 

 

1,041,309

 

Total liabilities and stockholders' equity

 

$

1,559,747

 

 

$

1,530,452

 

 

 

 

 

 

 

 

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

 

 

3


 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(In thousands, except per share amounts)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Commissions

$

153,164

 

 

$

142,826

 

 

$

482,740

 

 

$

475,095

 

Information services

 

9,711

 

 

 

9,608

 

 

 

28,916

 

 

 

28,614

 

Post-trade services

 

9,000

 

 

 

9,444

 

 

 

28,056

 

 

 

29,553

 

Other

 

237

 

 

 

215

 

 

 

686

 

 

 

629

 

Total revenues

 

172,112

 

 

 

162,093

 

 

 

540,398

 

 

 

533,891

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

44,805

 

 

 

40,878

 

 

 

137,996

 

 

 

129,698

 

Depreciation and amortization

 

15,302

 

 

 

13,964

 

 

 

45,716

 

 

 

38,840

 

Technology and communications

 

14,169

 

 

 

10,665

 

 

 

38,851

 

 

 

31,245

 

Professional and consulting fees

 

7,560

 

 

 

10,847

 

 

 

26,101

 

 

 

31,191

 

Occupancy

 

3,381

 

 

 

3,265

 

 

 

10,468

 

 

 

9,882

 

Marketing and advertising

 

1,797

 

 

 

1,821

 

 

 

6,535

 

 

 

6,153

 

Clearing costs

 

4,211

 

 

 

3,269

 

 

 

13,049

 

 

 

12,335

 

General and administrative

 

4,576

 

 

 

3,381

 

 

 

12,479

 

 

 

9,893

 

Total expenses

 

95,801

 

 

 

88,090

 

 

 

291,195

 

 

 

269,237

 

Operating income

 

76,311

 

 

 

74,003

 

 

 

249,203

 

 

 

264,654

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

1,433

 

 

 

108

 

 

 

1,746

 

 

 

322

 

Interest expense

 

(138

)

 

 

(314

)

 

 

(648

)

 

 

(676

)

Equity in earnings of unconsolidated affiliate

 

869

 

 

 

 

 

 

1,060

 

 

 

 

Other, net

 

388

 

 

 

697

 

 

 

7,499

 

 

 

(1,952

)

Total other income (expense)

 

2,552

 

 

 

491

 

 

 

9,657

 

 

 

(2,306

)

Income before income taxes

 

78,863

 

 

 

74,494

 

 

 

258,860

 

 

 

262,348

 

Provision for income taxes

 

19,556

 

 

 

16,536

 

 

 

67,862

 

 

 

56,645

 

Net income

$

59,307

 

 

$

57,958

 

 

$

190,998

 

 

$

205,703

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.58

 

 

$

1.54

 

 

$

5.10

 

 

$

5.49

 

Diluted

$

1.58

 

 

$

1.52

 

 

$

5.07

 

 

$

5.40

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.70

 

 

$

0.66

 

 

$

2.10

 

 

$

1.98

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

37,479

 

 

 

37,529

 

 

 

37,464

 

 

 

37,502

 

Diluted

 

37,567

 

 

 

38,084

 

 

 

37,666

 

 

 

38,114

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

4


 

 

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(In thousands)

 

Net income

$

59,307

 

 

$

57,958

 

 

$

190,998

 

 

$

205,703

 

Net cumulative translation adjustment and foreign
currency exchange hedge, net of tax of $
0, $554, $0, and $8, respectively

 

(20,248

)

 

 

(5,149

)

 

 

(46,757

)

 

 

(5,943

)

Comprehensive income

$

39,059

 

 

$

52,809

 

 

$

144,241

 

 

$

199,760

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

5


 

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, 2022

 

$

123

 

 

$

330,262

 

 

$

(232,712

)

 

$

956,966

 

 

$

(13,330

)

 

$

1,041,309

 

Net income

 

 

 

 

 

 

 

 

 

 

 

64,769

 

 

 

 

 

 

64,769

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,051

)

 

 

(5,051

)

Stock-based compensation

 

 

 

 

 

8,099

 

 

 

 

 

 

 

 

 

 

 

 

8,099

 

Exercise of stock options

 

 

 

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

50

 

Withholding tax payments on restricted stock vesting and stock option exercises

 

 

 

 

 

(20,292

)

 

 

 

 

 

 

 

 

 

 

 

(20,292

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(38,800

)

 

 

 

 

 

 

 

 

(38,800

)

Cash dividend on common stock ($0.70 per share)

 

 

 

 

 

 

 

 

 

 

 

(26,543

)

 

 

 

 

 

(26,543

)

Balance at March 31, 2022

 

 

123

 

 

 

318,119

 

 

 

(271,512

)

 

 

995,192

 

 

 

(18,381

)

 

 

1,023,541

 

Net income

 

 

 

 

 

 

 

 

 

 

 

66,922

 

 

 

 

 

 

66,922

 

Cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,458

)

 

 

(21,458

)

Stock-based compensation

 

 

 

 

 

6,503

 

 

 

 

 

 

 

 

 

 

 

 

6,503

 

Exercise of stock options

 

 

 

 

 

86

 

 

 

 

 

 

 

 

 

 

 

 

86

 

Withholding tax payments on restricted stock vesting and stock option exercises

 

 

 

 

 

339

 

 

 

 

 

 

 

 

 

 

 

 

339

 

Repurchases of common stock

 

 

 

 

 

 

 

 

(48,740

)

 

 

 

 

 

 

 

 

(48,740

)

Cash dividend on common stock ($0.70 per share)

 

 

 

 

 

 

 

 

 

 

 

(26,391

)

 

 

 

 

 

(26,391

)

Balance at June 30, 2022

 

 

123

 

 

 

325,047

 

 

 

(320,252

)

 

 

1,035,723

 

 

 

(39,839

)

 

 

1,000,802

 

Net income

 

 

 

 

 

 

 

 

 

 

 

59,307

 

 

 

 

 

 

59,307

 

Cumulative translation adjustment and foreign currency exchange hedge, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,248

)

 

 

(