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MarketAxess Reports Fourth Quarter and Full Year 2023 Results

MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for fixed-income securities, today announced financial results for the fourth quarter and full year ended December 31, 2023.

4Q23 select financial and operational highlights*

  • Total revenues of $197.2 million, up 10.9%, includes Pragma revenues of $7.6 million and an increase of $1.8 million from the impact of foreign currency fluctuations.
  • Total expenses of $120.2 million, up 19.9%, includes Pragma operating expenses of $8.7 million, acquisition-related expenses and costs associated with efficiency initiatives of $2.4 million and an increase of $1.7 million from the impact of foreign currency fluctuations.
  • 16.5% increase in diluted EPS to $1.84 on net income of $69.6 million, up from diluted EPS of $1.58 on net income of $59.2 million in the prior year. The current quarter includes a benefit to earnings in the provision for income taxes from return-to-provision adjustments and the purchase of transferable tax credits by the Company.
  • Record information services revenue of $11.9 million, up 14.6%, and record post-trade revenue of $11.0 million, up 24.1%. Information services and post-trade revenues include increases from the impact of foreign currency fluctuations of $0.4 million and $0.6 million, respectively.
  • Strong geographic and product diversification with a 10.8% increase in average daily volume (“ADV”) from international products (emerging markets and Eurobonds); record portfolio trading volume of $41.8 billion, up 35.8%, and 7.8% growth in municipal bonds on record ADV, with a record $23.7 billion in tax-exempt trading volume.
  • 30.3% of eligible portfolio trading volume was executed over MarketAxess X-Pro, up from 18.2% in 3Q23, as client engagement with the new platform continues to grow.
  • Record automated and algorithmic trading volume (+40.3%), trade count (+41.3%) and active client firms (+36.0%); record level of algorithmic responses (+40.0%).
  • Record 2,108 (+2.1%) active client firms, record 1,638 (+3.7%) active U.S. credit client firms; 1,053 (+2.3%) international active client firms and record 1,167 (+6.6%) active client firms trading three or more products.
  • 36% total credit Open Trading® share,1 down from 38% in the prior year. The Company delivered estimated price improvement2 via Open Trading of approximately $173 million in the quarter and $702 million for full year 2023.

*All comparisons versus 4Q22 unless otherwise noted.

Chris Concannon, CEO of MarketAxess, commented:

“In 2023, we made significant strides in enhancing our client franchise, increasing client engagement with MarketAxess X-Pro, our new trading platform, and delivering solid growth in ADV across new product areas and regions.

We have integrated our market leading data, protocols and liquidity pools for clients through X-Pro, designed to make client workflows more efficient. Our innovative proprietary data is powering X-Pro, and we believe, is helping our clients make better trading decisions. We are expanding our automated and algorithmic trading solutions by leveraging our newly acquired quantitative trading expertise to generate new client algorithms. These new algorithms solve for increasing investor demand for efficiency and the need to enhance profitability.

We made significant progress establishing the next generation of trading tools for clients to engage our integrated markets. We are entering 2024 with a more favorable backdrop for fixed-income, and our client franchise has never been stronger. We are focused on realizing the full potential of the investments we have made to drive continued growth in the quarters ahead.”

Table 1: 4Q23 select financial results

$ in millions, except per share data

(unaudited)
Revenues Operating Income Net Income Diluted EPS Net Income

Margin (%)
EBITDA3 EBITDA Margin

(%)3

4Q23

$197

$77

$70

$1.84

35.3%

$99

50.0%

4Q22

$178

$78

$59

$1.58

33.3%

$92

51.7%

% Change

11%

(1%)

18%

16%

+200 bps

7%

(170) bps

FY 2023

$753

$315

$258

$6.85

34.3%

$383

50.9%

FY 2022

$718

$327

$250

$6.65

34.8%

$395

55.0%

% Change

5%

(4%)

3%

3%

(50) bps

(3%)

(410) bps

 

Table 1A: 4Q23 trading volume (ADV)

CREDIT

RATES

$ in millions

(unaudited)
US/UK Trading

Days4
Total

ADV
Total

Credit
High-Grade High-Yield Emerging

Markets
Eurobonds Municipal

Bonds
Total

Rates
US Govt.

Bonds
Agcy./Other

Govt. Bonds

4Q23

62/63

$29,641

$13,108

$6,215

$1,653

$2,927

$1,767

$539

$16,533

$16,106

$427

4Q22

61/63

$30,424

$12,042

$5,487

$1,805

$2,666

$1,569

$500

$18,382

$18,026

$356

% Change

 

(3%)

9%

13%

(8%)

10%

13%

8%

(10%)

(11%)

20%

 

Table 1B: 4Q23 estimated market share

CREDIT RATES


(unaudited)
High-Grade High-Yield High-Grade/High-

Yield Combined
Eurobonds5 Composite

Corporate Bond6
Municipals US Govt.

Bonds

4Q23

20.9%

17.2%

20.0%

15.7%

19.4%

5.8%

2.3%

4Q22

21.1%

20.5%

20.9%

18.2%

20.9%

5.0%

3.1%

Bps Change

(20) bps

(330) bps

(90) bps

(250) bps

(150) bps

+80 bps

(80) bps

 

4Q23 overview of results

Revenues and trading volume

Credit

  • Total credit commission revenue of $161.9 million (including $34.6 million in fixed-distribution fees) increased $8.2 million, or 5%, compared to $153.7 million (including $32.8 million in fixed-distribution fees) in the prior year. The increase in total credit commission revenue was driven principally by higher estimated market volumes and a $1.8 million, or 5%, increase in total credit fixed-distribution fees, partially offset by lower estimated market share and lower average fee per million (“FPM”). The increase in total credit fixed-distribution fees was driven principally by new dealers on fixed fee plans and upgrades of dealers on existing fixed fee plans. The decline in FPM for total credit to $156.28 from $163.87 in the prior year was mainly due to product (lower U.S. high-yield activity) and protocol (higher portfolio trading volume) mix-shift.
    • Total credit ADV of $13.1 billion, up 8.9% versus the prior year, and up 17.5% versus 3Q23 levels.
    • U.S. high-grade ADV of $6.2 billion, up 13.3% from the prior year, and up 20.0% versus 3Q23. Estimated market share of 20.9%, down slightly from 21.1% in the prior year, but up from 20.0% in 3Q23. U.S. high-grade estimated market ADV increased 13.9% compared to the prior year, and increased 14.7% versus 3Q23.
    • U.S. high-yield ADV of $1.7 billion, down 8.4% compared to the prior year, but up 27.7% from 3Q23 levels. Estimated market share of 17.2%, down from 20.5% in the prior year, but up from 16.1% in 3Q23. U.S. high-yield estimated market ADV increased 9.0% versus the prior year, and increased 19.4% compared to 3Q23. The decrease in U.S. high-yield estimated market share year-over-year was driven principally by an estimated 18.6% decrease in ETF market maker activity on the platform.
    • Emerging markets ADV of $2.9 billion, up 9.8% from the prior year, and up 4.6% from 3Q23 levels. The year-over-year increase was principally due to a 25.6% increase in local currency trading ADV. Emerging markets estimated market ADV increased 12.1% compared to the prior year, and increased 4.2% compared to 3Q23.7
    • Eurobonds ADV of $1.8 billion, up 12.6% from the prior year, and up 19.1% from 3Q23.
    • Record municipal bond ADV of $539 million, up 7.8% from the prior year, and up 38.9% from 3Q23. The current quarter included a record $23.7 billion in tax-exempt trading volume. Estimated market share of 5.8%, up from 5.0% in the prior year and in line with 3Q23 levels. Estimated market ADV down 7.0% compared to the prior year, but up 38.5% compared to 3Q23.
    • Axess IQTM, the order and execution workflow solution designed for wealth management and private banking clients, achieved record ADV of $140.6 million, up 67.0% from the prior year, and up 41.9% from 3Q23 levels.
    • Record $41.8 billion in total portfolio trading volume, up 35.8% from the prior year, and up 52.1% from 3Q23. Approximately $11.6 billion, or 30.3%, of our eligible portfolio trading volume was executed over X-Pro, our new trading platform, compared to approximately $4.8 billion, or 18.2%, in 3Q23.
    • 36% Open Trading share1 of total credit trading volume, down from 38% in the prior year, but up from 34% in 3Q23.

Rates

  • Total rates commission revenue of $4.8 million was in line with the prior year. A 10% decrease in rates ADV to $16.5 billion was offset by an 11% increase in FPM for total rates products to $4.62, compared to $4.16 in the prior year.

Information services & post-trade services

  • Record information services revenue of $11.9 million increased $1.5 million, or 15%, compared to the prior year. The increase in revenue was principally driven by net new data contract revenue and the impact of foreign currency fluctuations.
  • Record post-trade services revenue of $11.0 million was up 24% compared to the prior year mainly due to the impact of price increases, higher end-of-year resubmissions revenue and the impact of foreign currency fluctuations.

Technology services

  • Total technology services revenue of $2.5 million, up from $0.2 million in the prior year. The current quarter includes $2.3 million in revenue from the acquisition of Pragma.

Expenses

  • Total expenses of $120.2 million, up 19.9%, includes Pragma operating expenses of $8.7 million, acquisition-related expenses and costs associated with efficiency initiatives of $2.4 million and an increase of $1.7 million from the impact of foreign currency fluctuations.

Non-operating

  • Other income (expense): Other income was $6.8 million, up from $1.8 million in the prior year. The current quarter included interest income of $6.3 million, compared to $3.3 million in the prior year, driven by higher interest rates.
  • Tax rate: The effective tax rate was 16.9%, compared to 25.4% in the prior year. The decrease in the effective tax rate was driven by return-to-provision adjustments and the purchase of transferable tax credits by the Company.

Capital

  • The Company had $586.1 million in cash, cash equivalents and investments as of December 31, 2023, which includes the impact of the Pragma acquisition. There were no outstanding borrowings under the Company’s credit facility.
  • The Board declared a quarterly cash dividend of $0.74 per share, an increase from $0.72 per share, payable on February 28, 2024 to stockholders of record as of the close of business on February 14, 2024.

Other

  • Employee headcount was 881 as of December 31, 2023, which includes 59 employees from the Pragma acquisition, compared to 744 as of December 31, 2022 and 853 as of September 30, 2023.

Guidance for full year 2024

For the full year 2024, the Company is providing the following guidance which is based on foreign exchange rates as of December 31, 2023:

  • Revenue from Pragma is expected to grow in the mid-single digits (percent). Pragma’s revenue in 4Q23 was $7.6 million.
  • Expenses are expected to be in the range of $480.0 million to $500.0 million and includes a full year of Pragma expenses estimated to range between $33.0 million to $35.0 million. Pragma expenses are expected to include amortization expense on acquired intangible assets of $4.8 million. Based on the midpoint of the stated guidance range, total expenses are expected to increase by approximately 12%, 6% excluding the impact of Pragma expenses.
  • The effective tax rate is expected to be between 24.0% and 25.0%.
  • Capital expenditures to support new protocols, products and trading platform enhancements are expected to be in the range of $60.0 million to $65.0 million.
1

Open Trading share of total credit trading volume is derived by taking total Open Trading volume across all credit products where Open Trading is offered and dividing by total credit trading volume across all credit products where Open Trading is offered.

 
2

Estimated price improvement consists of estimated liquidity taker price improvement (defined as the difference between the winning price and the best disclosed dealer cover price) and estimated liquidity provider price improvement (defined as the difference between the winning price and then current Composite+ bid or offer level, offer if the provider is buying, bid if provider is selling) at the time of the inquiry.

 
3

EBITDA and EBITDA margin are non-GAAP financial measures. Refer to “Non-GAAP financial measures and other items” for a discussion of changes made to the calculation of EBITDA beginning in the first quarter of 2023.

 
4

The number of U.S. trading days is based on the SIFMA holiday recommendation calendar and the number of U.K. trading days is based primarily on the U.K. bank holiday schedule.

 
5

Eurobonds estimated market ADV and estimated market share is derived from MarketAxess TraX data for Eurobonds and covered bonds market trading volume, which is currently estimated to represent approximately 80% of the total European market.

 
6

Composite corporate bond estimated market share is defined as combined estimated market share across U.S. high-grade (derived from FINRA TRACE reported data), U.S. high-yield (derived from FINRA TRACE reported data), emerging markets (derived from FINRA TRACE-reportable emerging markets volume, principally U.S. dollar denominated corporates) and Eurobonds (derived from MarketAxess TraX data, which is now estimated to represent approximately 80% of the total European market) product areas.

 
7

Emerging markets estimated market ADV is derived by combining MarketAxess TraX emerging markets trading volume (currently estimated to represent approximately 60% of total emerging markets) and FINRA TRACE-reportable emerging markets trading volume, principally U.S. dollar denominated corporates.

 

Non-GAAP financial measures and other items

To supplement the Company’s unaudited financial statements presented in accordance with generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP measures of financial performance, including earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA margin and free cash flow. Starting with the first quarter of 2023, our calculation of EBITDA has been revised to adjust for interest income in addition to interest expense. In prior periods, we only adjusted for interest expense because interest income amounts were insignificant. Prior comparable periods have now been recast to conform to the current presentation. Likewise, starting with the first quarter of 2023, EBITDA margin is calculated by adjusting for interest income in addition to interest expense and prior comparable periods have been recast to conform to the current presentation. We define EBITDA margin as EBITDA divided by revenues. We define free cash flow as net cash provided by/(used in) operating activities excluding the net change in trading investments and net change in securities failed-to-deliver and securities failed-to-receive from broker-dealers, clearing organizations and customers, less expenditures for furniture, equipment and leasehold improvements and capitalized software development costs. The Company believes that these non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, provide additional information regarding the Company’s operating results because they assist both investors and management in analyzing and evaluating the performance of our business. See the attached schedule for a reconciliation of GAAP net income to EBITDA, GAAP net income margin to EBITDA margin and GAAP net cash provided by/(used in) operating activities to free cash flow.

Please refer to Tables 6 and 7 for a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures.

Webcast and conference call information

Chris Concannon, Chief Executive Officer, and Richard Schiffman, Global Head of Trading Solutions, will host a conference call to discuss the Company’s financial results and outlook on Wednesday, January 31, 2024 at 10:00 a.m. ET. To access the conference call, please dial 888-660-6576 (U.S.) and use the ID 3629577 or 929-203-1995 (international) and use the ID 3629577. The Company will also host a live audio Webcast of the conference call on the Investor Relations section of the Company's website at http://investor.marketaxess.com. The Webcast will be archived on http://investor.marketaxess.com for 90 days following the announcement.

General Notes Regarding the Data Presented

Reported MarketAxess volume in all product categories includes only fully electronic trading volume. MarketAxess trading volumes, TRACE reported volumes and MarketAxess Post-Trade processed volumes are available on the Company’s website at investor.marketaxess.com/volume.

For periods beginning with January 2024, the Company will be making changes to the market volume data used to calculate estimated market share for Municipal and U.S. Government Bonds. For Municipal Bonds, the Company previously used estimates, derived from data issued by the Municipal Securities Rule Making Board (“MSRB”), including estimates for new issuance, commercial paper and variable-rate trading activity, and excluded these volumes from the estimated market volume data. While the Company still uses estimates, the new methodology for identifying and excluding these volumes from the market volume data is now based on MSRB “flags” to identify new issuance, commercial paper, and variable-rate volumes. For U.S. Government Bonds, the previous data source for estimated market volumes was the Federal Reserve Bank’s Reported Primary Dealer U.S. Treasury Bond Trading Volumes, which was reported on a one-week lag. The new source for U.S. Government Bond trading volumes is FINRA’s U.S. Treasury TRACE data. The Company believes that the refined methodology used for Municipal Bonds, and the new data source for U.S. Government Bonds, will provide more accurate measures of estimated market volumes and estimated market share. Prior comparable periods will be recast retrospectively for both Municipal and U.S. Government Bonds to conform to the updated presentation of the data. Beginning in January 2024, the new estimated market volume data will also be available on the Company’s website at investor.marketaxess.com/volume.

In addition, beginning with January 2024, the Company will no longer include Eurobonds or Emerging Markets market ADV or estimated market share. The Company is currently reviewing its methodology for calculating such statistics, which historically have been derived from MarketAxess TraX data, to ensure that the statistics presented provide a complete and accurate view of the market.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements, including statements about the outlook and prospects for Company, market conditions and industry growth, as well as statements about the Company’s future financial and operating performance. These and other statements that relate to future results and events are based on MarketAxess’ current expectations. The Company’s actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties, including: global economic, political and market factors; risks relating to the COVID-19 pandemic, including the possible effects of the economic conditions worldwide resulting from the COVID-19 pandemic; adverse effects as a result of climate change or other ESG risks that could affect our reputation; the level of trading volume transacted on the MarketAxess platform; the rapidly evolving nature of the electronic financial services industry; the level and intensity of competition in the fixed-income electronic trading industry and the pricing pressures that may result; reputational or credibility risks related to our data products and index business; the variability of our growth rate; our ability to introduce new fee plans and our clients’ response; our ability to attract clients or adapt our technology and marketing strategy to new markets; risks related to our growing international operations; our dependence on our broker-dealer clients; the loss of any of our significant institutional investor clients; our exposure to risks resulting from non-performance by counterparties to transactions executed between our clients in which we act as an intermediary in matched principal trades; risks related to self-clearing; risks related to sanctions levied against states or individuals that could expose us to operational or regulatory risks; the effect of rapid market or technological changes on us and the users of our technology; our dependence on third-party suppliers for key products and services; our ability to successfully maintain the integrity of our trading platform and our response to system failures, capacity constraints and business interruptions; the occurrence of design defects, errors, failures or delays with our platforms; our vulnerability to malicious cyber-attacks and attempted data security breaches; our actual or perceived failure to comply with privacy and data protection laws; our ability to protect our intellectual property rights or technology and defend against intellectual property infringement or other claims; our ability to enter into strategic alliances and to acquire other businesses and successfully integrate them with our business; our dependence on our management team and our ability to attract and retain talent; limitations on our flexibility because we operate in a highly regulated industry; the increasing government regulation of us and our clients; risks related to the divergence of U.K. and European Union legal and regulatory requirements following the U.K.’s exit from the European Union; our exposure to costs and penalties related to our extensive regulation; our risks of litigation and securities laws liability; our future capital needs and our ability to obtain capital when needed; limitations on our operating flexibility contained in our credit agreement; and other factors. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. More information about these and other factors affecting MarketAxess’ business and prospects is contained in MarketAxess’ periodic filings with the Securities and Exchange Commission and can be accessed at www.marketaxess.com.

About MarketAxess

MarketAxess (Nasdaq: MKTX) operates a leading electronic trading platform that delivers greater trading efficiency, a diversified pool of liquidity and significant cost savings to institutional investors and broker-dealers across the global fixed-income markets. Over 2,000 firms leverage MarketAxess’ patented technology to efficiently trade fixed-income securities. MarketAxess’ award-winning Open Trading® marketplace is widely regarded as the preferred all-to-all trading solution in the global credit markets. Founded in 2000, MarketAxess connects a robust network of market participants through an advanced full trading lifecycle solution that includes automated trading solutions, intelligent data and index products and a range of post-trade services. Learn more at www.marketaxess.com and on X @MarketAxess.

 

Table 2: Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

In thousands, except per share data (unaudited)

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

 

% Change

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$

171,891

 

 

$

158,443

 

 

 

8.5

%

 

$

662,964

 

 

$

641,183

 

 

 

3.4

%

Information services

 

 

11,917

 

 

 

10,398

 

 

 

14.6

 

 

 

46,383

 

 

 

39,314

 

 

 

18.0

 

Post-trade services

 

 

10,950

 

 

 

8,821

 

 

 

24.1

 

 

 

40,178

 

 

 

36,877

 

 

 

9.0

 

Technology services

 

 

2,490

 

 

 

240

 

 

NM

 

 

 

3,022

 

 

 

926

 

 

 

226.3

 

Total revenues

 

 

197,248

 

 

 

177,902

 

 

 

10.9

 

 

 

752,547

 

 

 

718,300

 

 

 

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee compensation and

benefits

 

 

57,356

 

 

 

44,108

 

 

 

30.0

 

 

 

206,926

 

 

 

182,104

 

 

 

13.6

 

Depreciation and amortization

 

 

19,530

 

 

 

15,730

 

 

 

24.2

 

 

 

70,557

 

 

 

61,446

 

 

 

14.8

 

Technology and communications

 

 

17,228

 

 

 

14,113

 

 

 

22.1

 

 

 

62,801

 

 

 

52,964

 

 

 

18.6

 

Professional and consulting fees

 

 

7,604

 

 

 

7,848

 

 

 

(3.1

)

 

 

31,935

 

 

 

33,949

 

 

 

(5.9

)

Occupancy

 

 

3,903

 

 

 

3,653

 

 

 

6.8

 

 

 

14,216

 

 

 

14,121

 

 

 

0.7

 

Marketing and advertising

 

 

2,646

 

 

 

3,442

 

 

 

(23.1

)

 

 

11,049

 

 

 

9,977

 

 

 

10.7

 

Clearing costs

 

 

4,610

 

 

 

4,614

 

 

 

(0.1

)

 

 

17,002

 

 

 

17,663

 

 

 

(3.7

)

General and administrative

 

 

7,344

 

 

 

6,721

 

 

 

9.3

 

 

 

23,042

 

 

 

19,200

 

 

 

20.0

 

Total expenses

 

 

120,221

 

 

 

100,229

 

 

 

19.9

 

 

 

437,528

 

 

 

391,424

 

 

 

11.8

 

Operating income

 

 

77,027

 

 

 

77,673

 

 

 

(0.8

)

 

 

315,019

 

 

 

326,876

 

 

 

(3.6

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

6,274

 

 

 

3,294

 

 

 

90.5

 

 

 

22,425

 

 

 

5,040

 

 

 

344.9

 

Interest expense

 

 

(1,636

)

 

 

(52

)

 

NM

 

 

 

(1,983

)

 

 

(700

)

 

 

183.3

 

Equity in earnings of

unconsolidated affiliate

 

 

156

 

 

 

66

 

 

 

136.4

 

 

 

735

 

 

 

1,126

 

 

 

(34.7

)

Other, net

 

 

1,991

 

 

 

(1,553

)

 

NM

 

 

 

(3,496

)

 

 

5,946

 

 

NM

 

Total other income (expense)

 

 

6,785

 

 

 

1,755

 

 

 

286.6

 

 

 

17,681

 

 

 

11,412

 

 

 

54.9

 

Income before income taxes

 

 

83,812

 

 

 

79,428

 

 

 

5.5

 

 

 

332,700

 

 

 

338,288

 

 

 

(1.7

)

Provision for income taxes

 

 

14,185

 

 

 

20,202

 

 

 

(29.8

)

 

 

74,645

 

 

 

88,064

 

 

 

(15.2

)

Net income

 

$

69,627

 

 

$

59,226

 

 

 

17.6

 

 

$

258,055

 

 

$

250,224

 

 

 

3.1

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.85

 

 

$

1.58

 

 

 

 

 

 

$

6.87

 

 

$

6.68

 

 

 

 

 

Diluted

 

$

1.84

 

 

$

1.58

 

 

 

 

 

 

$

6.85

 

 

$

6.65

 

 

 

 

 

Cash dividends declared per

common share

 

$

0.72

 

 

$

0.70

 

 

 

 

 

 

$

2.88

 

 

$

2.80

 

 

 

 

 

Weighted-average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,730

 

 

 

37,480

 

 

 

 

 

 

 

37,546

 

 

 

37,468

 

 

 

 

 

Diluted

 

 

37,809

 

 

 

37,573

 

 

 

 

 

 

 

37,654

 

 

 

37,643

 

 

 

 

 

NM - not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3: Commission Revenue Detail

In thousands, except fee per million data

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

(unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

2023

 

 

2022

 

% Change

 

Variable transaction fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

$

127,283

 

 

$

120,887

 

 

 

5.3

%

 

$

496,028

 

 

$

491,680

 

 

0.9

%

Rates

 

 

 

4,735

 

 

 

4,667

 

 

 

1.5

 

 

 

20,749

 

 

 

22,341

 

 

(7.1

)

Other

 

 

 

4,979

 

 

 

 

NM

 

 

 

4,979

 

 

 

NM

 

Total variable transaction fees

 

 

 

136,997

 

 

 

125,554

 

 

 

9.1

 

 

 

521,756

 

 

 

514,021

 

 

1.5

 

Fixed distribution fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

$

34,581

 

 

 

32,817

 

 

 

5.4

 

 

 

140,700

 

 

 

126,915

 

 

10.9

 

Rates

 

 

 

57

 

 

 

72

 

 

 

(20.8

)

 

 

252

 

 

 

247

 

 

2.0

 

Other

 

 

 

256

 

 

 

 

NM

 

 

 

256

 

 

 

NM

 

Total fixed distribution fees

 

 

 

34,894

 

 

 

32,889

 

 

 

6.1

 

 

 

141,208

 

 

 

127,162

 

 

11.0

 

Total commission revenue

 

 

$

171,891

 

 

$

158,443

 

 

 

8.5

 

 

$

662,964

 

 

$

641,183

 

 

3.4

 

Average variable transaction fee per million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit

 

 

$

156.28

 

 

$

163.87

 

 

 

(4.6

)%

 

$

158.61

 

 

$

166.96

 

 

(5.0

)%

Rates

 

 

 

4.62

 

 

 

4.16

 

 

 

11.1

 

 

 

4.46

 

 

 

4.10

 

 

8.8

 

 
 

Table 4: Trading Volume Detail*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

In millions (unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

 

 

Volume

 

 

ADV

 

 

Volume

 

 

ADV

 

 

Volume

 

ADV

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High-grade

 

 

$

385,301

 

 

$

6,215

 

 

$

334,735

 

 

$

5,487

 

 

 

15.1

%

 

13.3

%

High-yield

 

 

 

102,501

 

 

 

1,653

 

 

 

110,091

 

 

 

1,805

 

 

 

(6.9

)

 

(8.4

)

Emerging markets

 

 

 

181,445

 

 

 

2,927

 

 

 

162,597

 

 

 

2,666

 

 

 

11.6

 

 

9.8

 

Eurobonds

 

 

 

111,330

 

 

 

1,767

 

 

 

98,853

 

 

 

1,569

 

 

 

12.6

 

 

12.6

 

Other credit

 

 

 

33,854

 

 

 

546

 

 

 

31,404

 

 

 

515

 

 

 

7.8

 

 

6.0

 

Total credit trading

 

 

 

814,431

 

 

 

13,108

 

 

 

737,680

 

 

 

12,042

 

 

 

10.4

 

 

8.9

 

Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government bonds

 

 

 

998,542

 

 

 

16,106

 

 

 

1,099,596

 

 

 

18,026

 

 

 

(9.2

)

 

(10.7

)

Agency and other government bonds

 

 

 

26,684

 

 

 

427

 

 

 

22,138

 

 

 

356

 

 

 

20.5

 

 

19.9

 

Total rates trading

 

 

 

1,025,226

 

 

 

16,533

 

 

 

1,121,734

 

 

 

18,382

 

 

 

(8.6

)

 

(10.1

)

Total trading

 

 

$

1,839,657

 

 

$

29,641

 

 

$

1,859,414

 

 

$

30,424

 

 

 

(1.1

)

 

(2.6

)

Number of U.S. Trading Days1

 

 

 

 

 

 

62

 

 

 

 

 

 

61

 

 

 

 

 

 

 

 

Number of U.K. Trading Days2

 

 

 

 

 

 

63

 

 

 

 

 

 

63

 

 

 

 

 

 

 

 

 
 

 

 

 

Year Ended December 31,

 

In millions (unaudited)

 

 

2023

 

 

2022

 

 

% Change

 

 

 

 

Volume

 

 

ADV

 

 

Volume

 

 

ADV

 

 

Volume

 

ADV

 

Credit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High-grade

 

 

$

1,457,559

 

 

$

5,854

 

 

$

1,364,530

 

 

$

5,480

 

 

 

6.8

%

 

6.8

%

High-yield

 

 

 

398,275

 

 

 

1,599

 

 

 

424,812

 

 

 

1,706

 

 

 

(6.2

)

 

(6.3

)

Emerging markets

 

 

 

717,877

 

 

 

2,883

 

 

 

693,560

 

 

 

2,785

 

 

 

3.5

 

 

3.5

 

Eurobonds

 

 

 

441,171

 

 

 

1,758

 

 

 

362,713

 

 

 

1,451

 

 

 

21.6

 

 

21.2

 

Other credit

 

 

 

112,451

 

 

 

451

 

 

 

99,225

 

 

 

398

 

 

 

13.3

 

 

13.3

 

Total credit trading

 

 

 

3,127,333

 

 

 

12,545

 

 

 

2,944,840

 

 

 

11,820

 

 

 

6.2

 

 

6.1

 

Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government bonds

 

 

 

4,545,850

 

 

 

18,256

 

 

 

5,347,607

 

 

 

21,476

 

 

 

(15.0

)

 

(15.0

)

Agency and other government bonds

 

 

 

106,933

 

 

 

427

 

 

 

96,782

 

 

 

388

 

 

 

10.5

 

 

10.1

 

Total rates trading

 

 

 

4,652,783

 

 

 

18,683

 

 

 

5,444,389

 

 

 

21,864

 

 

 

(14.5

)

 

(14.5

)

Total trading

 

 

$

7,780,116

 

 

$

31,228

 

 

$

8,389,229

 

 

$

33,684

 

 

 

(7.3

)

 

(7.3

)

Number of U.S. Trading Days1

 

 

 

 

 

 

249

 

 

 

 

 

 

249

 

 

 

 

 

 

 

 

Number of U.K. Trading Days2

 

 

 

 

 

 

251

 

 

 

 

 

 

250

 

 

 

 

 

 

 

 

1 The number of U.S. trading days is based on the SIFMA holiday recommendation calendar.

2 The number of U.K. trading days is based on the U.K. Bank holiday schedule.

*Consistent with FINRA TRACE reporting standards, both sides of trades are included in the Company's reported volumes when the Company executes trades on a matched principal basis between two counterparties. Consistent with industry standards, U.S. government bond trades are single-counted.

NM - not meaningful

 

 

 

 

 

 

 

 

 

 

 

Table 5: Consolidated Condensed Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

In thousands (unaudited)

 

December 31, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

451,280

 

 

$

430,746

 

 

Cash segregated under federal regulations

 

 

45,122

 

 

 

50,947

 

 

Investments, at fair value

 

 

134,861

 

 

 

83,792

 

 

Accounts receivable, net

 

 

89,839

 

 

 

78,450

 

 

Receivables from broker-dealers, clearing organizations

and customers

 

 

687,936

 

 

 

476,335

 

 

Goodwill

 

 

236,706

 

 

 

154,789

 

 

Intangible assets, net of accumulated amortization

 

 

119,108

 

 

 

98,065

 

 

Furniture, equipment, leasehold improvements and

capitalized software, net

 

 

102,671

 

 

 

100,256

 

 

Operating lease right-of-use assets

 

 

63,045

 

 

 

66,106

 

 

Prepaid expenses and other assets

 

 

84,499

 

 

 

68,289

 

 

Total assets

 

$

2,015,067

 

 

$

1,607,775

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Accrued employee compensation

 

$

60,124

 

 

$

56,302

 

 

Payables to broker-dealers, clearing organizations

and customers

 

 

537,398

 

 

 

303,993

 

 

Income and other tax liabilities

 

 

7,892

 

 

 

28,448

 

 

Accounts payable, accrued expenses

and other liabilities

 

 

37,013

 

 

 

55,263

 

 

Operating lease liabilities

 

 

79,677

 

 

 

82,676

 

 

Total liabilities

 

 

722,104

 

 

 

526,682

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

Common stock

 

 

123

 

 

 

123

 

 

Additional paid-in capital

 

 

333,292

 

 

 

345,468

 

 

Treasury stock

 

 

(260,298

)

 

 

(328,326

)

 

Retained earnings

 

 

1,244,216

 

 

 

1,101,525

 

 

Accumulated other comprehensive loss

 

 

(24,370

)

 

 

(37,697

)

 

Total stockholders' equity

 

 

1,292,963

 

 

 

1,081,093

 

 

Total liabilities and stockholders' equity

 

$

2,015,067

 

 

$

1,607,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 6: Reconciliation of Net Income to EBITDA and Net Income Margin to EBITDA Margin

 

 

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

In thousands (unaudited)

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

69,627

 

 

$

59,226

 

 

 

$

258,055

 

 

$

250,224

 

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(6,274

)

 

 

(3,294

)

 

 

 

(22,425

)

 

 

(5,040

)

 

Interest expense

 

 

1,636

 

 

 

52

 

 

 

 

1,983

 

 

 

700

 

 

Provision for income taxes

 

 

14,185

 

 

 

20,202

 

 

 

 

74,645

 

 

 

88,064

 

 

Depreciation and amortization

 

 

19,530

 

 

 

15,730

 

 

 

 

70,557

 

 

 

61,446

 

 

EBITDA

 

$

98,704

 

 

$

91,916

 

 

 

$

382,815

 

 

$

395,394

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income margin1

 

 

35.3

%

 

 

33.3

%

 

 

 

34.3

%

 

 

34.8

%

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(3.2

)

 

 

(1.8

)

 

 

 

(3.0

)

 

 

(0.8

)

 

Interest expense

 

 

0.8

 

 

 

 

 

 

 

0.3

 

 

 

0.1

 

 

Provision for income taxes

 

 

7.2

 

 

 

11.4

 

 

 

 

9.9

 

 

 

12.3

 

 

Depreciation and amortization

 

 

9.9

 

 

 

8.8

 

 

 

 

9.4

 

 

 

8.6

 

 

EBITDA margin2

 

 

50.0

%

 

 

51.7

%

 

 

 

50.9

%

 

 

55.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

 

 

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

In thousands (unaudited)

 

2023

 

 

2022

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

141,685

 

 

$

134,226

 

 

 

$

333,767

 

 

$

289,231

 

 

Exclude: Net change in trading investments

 

 

948

 

 

 

49,972

 

 

 

 

25,248

 

 

 

49,527

 

 

Exclude: Net change in fail-to-deliver/receive

from broker-dealers, clearing organizations

and customers

 

 

(34,354

)

 

 

(71,933

)

 

 

 

(46,696

)

 

 

(25,994

)

 

Less: Purchases of furniture, equipment and

leasehold improvements

 

 

(2,071

)

 

 

(6,500

)

 

 

 

(9,326

)

 

 

(13,142

)

 

Less: Capitalization of software development

costs

 

 

(11,320

)

 

 

(11,621

)

 

 

 

(43,122

)

 

 

(38,730

)

 

Free cash flow

 

$

94,888

 

 

$

94,144

 

 

 

$

259,871

 

 

$

260,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Net income margin is derived by dividing net income by total revenues for the applicable period.

 

 

2 EBITDA margin is derived by dividing EBITDA by total revenues for the applicable period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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