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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, 2021

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 21, 2021, the number of shares of the Registrant’s voting common stock outstanding was 38,026,483.

 

 

 

 


 

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

 

 

 

 

Page

 

PART I — Financial Information

 

 

Item 1.

Financial Statements (Unaudited)

 

3

 

Consolidated Statements of Financial Condition as of September 30, 2021 and December 31, 2020

 

3

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

 

4

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020

 

5

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020

 

6

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

 

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

 

44

Item 4.

Controls and Procedures

 

45

 

PART II — Other Information

 

 

Item 1.

Legal Proceedings

 

46

Item 1A.

Risk Factors

 

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

46

Item 3.

Defaults Upon Senior Securities

 

46

Item 4.

Mine Safety Disclosures

 

47

Item 5.

Other Information

 

48

Item 6.

Exhibits

 

48

 

 

 

 

 

 

 

 

2


 

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

 

As of

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

(In thousands, except share
 and per share amounts)

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

432,715

 

 

$

460,858

 

Cash segregated under federal regulations

 

 

50,134

 

 

 

50,059

 

Investments, at fair value

 

 

35,767

 

 

 

28,111

 

Accounts receivable, net of allowance of $82 and $163 as of September 30, 2021 and December 31, 2020, respectively

 

 

67,766

 

 

 

79,577

 

Receivables from broker-dealers, clearing organizations and customers

 

 

551,841

 

 

 

279,915

 

Goodwill

 

 

154,789

 

 

 

147,388

 

Intangible assets, net of accumulated amortization

 

 

119,797

 

 

 

95,354

 

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

 

 

95,575

 

 

 

85,204

 

Operating lease right-of-use assets

 

 

72,586

 

 

 

75,924

 

Prepaid expenses and other assets

 

 

30,948

 

 

 

29,039

 

Total assets

 

$

1,611,918

 

 

$

1,331,429

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accrued employee compensation

 

$

49,046

 

 

$

62,326

 

Payables to broker-dealers, clearing organizations and customers

 

 

303,439

 

 

 

133,326

 

Income and other tax liabilities

 

 

44,871

 

 

 

42,750

 

Accounts payable, accrued expenses and other liabilities

 

 

69,300

 

 

 

44,354

 

Operating lease liabilities

 

 

89,963

 

 

 

93,612

 

Total liabilities

 

 

556,619

 

 

 

376,368

 

 

 

 

 

 

 

 

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, 2021 and December 31, 2020

 

 

 

 

 

 

Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock voting, $0.003 par value, 110,000,000 shares authorized, 40,907,339 shares and 40,851,100 shares issued and 38,026,483 shares and 38,005,330 shares outstanding as of September 30, 2021 and December 31, 2020, 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, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

323,631

 

 

 

329,742

 

Treasury stock - Common stock voting, at cost, 2,880,856 and 2,845,770 shares as of September 30, 2021 and December 31, 2020, respectively

 

 

(187,715

)

 

 

(169,523

)

Retained earnings

 

 

929,853

 

 

 

799,369

 

Accumulated other comprehensive loss

 

 

(10,593

)

 

 

(4,650

)

Total stockholders' equity

 

 

1,055,299

 

 

 

955,061

 

Total liabilities and stockholders' equity

 

$

1,611,918

 

 

$

1,331,429

 

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,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands, except per share amounts)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Commissions

$

142,826

 

 

$

150,586

 

 

$

475,095

 

 

$

478,632

 

Information services

 

9,608

 

 

 

8,501

 

 

 

28,614

 

 

 

25,570

 

Post-trade services

 

9,444

 

 

 

4,689

 

 

 

29,553

 

 

 

12,896

 

Other

 

215

 

 

 

230

 

 

 

629

 

 

 

681

 

Total revenues

 

162,093

 

 

 

164,006

 

 

 

533,891

 

 

 

517,779

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

40,878

 

 

 

37,583

 

 

 

129,698

 

 

 

120,413

 

Depreciation and amortization

 

13,964

 

 

 

9,032

 

 

 

38,840

 

 

 

25,404

 

Technology and communications

 

10,665

 

 

 

8,417

 

 

 

31,245

 

 

 

25,170

 

Professional and consulting fees

 

10,847

 

 

 

8,269

 

 

 

31,191

 

 

 

22,009

 

Occupancy

 

3,265

 

 

 

3,445

 

 

 

9,882

 

 

 

10,205

 

Marketing and advertising

 

1,821

 

 

 

1,148

 

 

 

6,153

 

 

 

5,633

 

Clearing costs

 

3,269

 

 

 

4,838

 

 

 

12,335

 

 

 

16,061

 

General and administrative

 

3,381

 

 

 

3,467

 

 

 

9,893

 

 

 

9,853

 

Total expenses

 

88,090

 

 

 

76,199

 

 

 

269,237

 

 

 

234,748

 

Operating income

 

74,003

 

 

 

87,807

 

 

 

264,654

 

 

 

283,031

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

108

 

 

 

344

 

 

 

322

 

 

 

2,327

 

Interest expense

 

(314

)

 

 

(1,046

)

 

 

(676

)

 

 

(1,046

)

Other, net

 

697

 

 

 

860

 

 

 

(1,952

)

 

 

(242

)

Total other income (expense)

 

491

 

 

 

158

 

 

 

(2,306

)

 

 

1,039

 

Income before income taxes

 

74,494

 

 

 

87,965

 

 

 

262,348

 

 

 

284,070

 

Provision for income taxes

 

16,536

 

 

 

20,189

 

 

 

56,645

 

 

 

57,624

 

Net income

$

57,958

 

 

$

67,776

 

 

$

205,703

 

 

$

226,446

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.54

 

 

$

1.81

 

 

$

5.49

 

 

$

6.06

 

Diluted

$

1.52

 

 

$

1.78

 

 

$

5.40

 

 

$

5.94

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.66

 

 

$

0.60

 

 

$

1.98

 

 

$

1.80

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

37,529

 

 

 

37,386

 

 

 

37,502

 

 

 

37,343

 

Diluted

 

38,084

 

 

 

38,160

 

 

 

38,114

 

 

 

38,129

 

 

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,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands)

 

Net income

$

57,958

 

 

$

67,776

 

 

$

205,703

 

 

$

226,446

 

Net cumulative translation adjustment and foreign currency exchange hedge, net of tax of $554, $1,654, $8, and $(908), respectively

 

(5,149

)

 

 

4,423

 

 

 

(5,943

)

 

 

213

 

Net unrealized gain on securities available-for-sale, net of tax of $0, $(276), $0 and $(172), respectively

 

 

 

 

(871

)

 

 

 

 

 

(542

)

Comprehensive income

$

52,809

 

 

$

71,328

 

 

$

199,760

 

 

$

226,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2021

 

$

123

 

 

$

329,742

 

 

$

(169,523

)

 

$

799,369

 

 

$

(4,650

)

 

$

955,061

 

Net income

 

 

 

 

 

 

 

 

 

 

 

80,457

 

 

 

 

 

 

80,457

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,932

)

 

 

(1,932

)

Stock-based compensation

 

 

 

 

 

7,424

 

 

 

 

 

 

 

 

 

 

 

 

7,424

 

Exercise of stock options

 

 

 

 

 

244

 

 

 

 

 

 

 

 

 

 

 

 

244

 

Withholding tax payments on restricted stock vesting and stock option exercises

 

 

 

 

 

(27,422

)

 

 

 

 

 

 

 

 

 

 

 

(27,422

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(520

)

 

 

 

 

 

 

 

 

(520

)

Cash dividend on common stock ($0.66 per share)

 

 

 

 

 

 

 

 

 

 

 

(25,079

)

 

 

 

 

 

(25,079

)

Balance at March 31, 2021

 

 

123

 

 

 

309,988

 

 

 

(170,043

)

 

 

854,747

 

 

 

(6,582

)

 

 

988,233

 

Net income

 

 

 

 

 

 

 

 

 

 

 

67,288

 

 

 

 

 

 

67,288

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,138

 

 

 

1,138

 

Stock-based compensation

 

 

 

 

 

6,134

 

 

 

 

 

 

 

 

 

 

 

 

6,134

 

Exercise of stock options

 

 

 

 

 

4,421

 

 

 

 

 

 

 

 

 

 

 

 

4,421

 

Withholding tax payments on restricted stock vesting and stock option exercises

 

 

 

 

 

(6,860

)

 

 

 

 

 

 

 

 

 

 

 

(6,860

)

Repurchases of common stock

 

 

 

 

 

 

 

 

(13,436

)

 

 

 

 

 

 

 

 

(13,436

)

Cash dividend on common stock ($0.66 per share)

 

 

 

 

 

 

 

 

 

 

 

(25,058

)

 

 

 

 

 

(25,058

)

Balance at June 30, 2021

 

 

123

 

 

 

313,683

 

 

 

(183,479

)

 

 

896,977

 

 

 

(5,444

)

 

 

1,021,860

 

Net income

 

 

 

 

 

 

 

 

 

 

 

57,958

 

 

 

 

 

 

57,958

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,149

)

 

 

(5,149

)

Stock-based compensation

 

 

 

 

 

6,754

 

 

 

 

 

 

 

 

 

 

 

 

6,754

 

Exercise of stock options

 

 

 

 

 

2,283

 

 

 

 

 

 

 

 

 

 

 

 

2,283

 

Withholding tax payments on restricted stock vesting and stock option exercises

 

 

 

 

 

911

 

 

 

 

 

 

 

 

 

 

 

 

911

 

Repurchases of common stock

 

 

 

 

 

 

 

 

(4,236

)

 

 

 

 

 

 

 

 

(4,236

)

Cash dividend on common stock ($0.66 per share)

 

 

 

 

 

 

 

 

 

 

 

(25,082

)

 

 

 

 

 

(25,082

)

Balance at September 30, 2021

 

$

123

 

 

$

323,631

 

 

$

(187,715

)

 

$

929,853

 

 

$

(10,593

)

 

$

1,055,299

 

 

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

 

 

 

 

6


 

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, 2020

 

$

122

 

 

$

342,541

 

 

$

(153,388

)

 

$

591,086

 

 

$

(10,270

)

 

$

770,091

 

Net income

 

 

 

 

 

 

 

 

 

 

 

74,816