MarketAxess(MKTX) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated revenue of $180 million for the quarter, with year-to-date revenue of$ 383 million, representing a 4% increase compared to the prior year [27][33] - Earnings per share (EPS) was reported at $1.59, with net income of$ 60 million [27][155] - Total commission revenue decreased by 3% in the quarter, while year-to-date figures are running 3% above prior year levels [10][33] - Record information services revenue reached $12 million, up 24% year-over-year, driven by a strong pipeline of new contracts [33] Business Line Data and Key Metrics Changes - Notional volumes in high-grade and high-yield ETFs decreased by 19% and 33% respectively, reflecting reduced trading activity due to lower volatility [6][10] - Auto-X trade volume now represents a record 10% of total credit volume, with trade count at a record 23% of total credit trades [105] - The adoption of automated tools continues to grow, with a record 146 active client firms leveraging automation tools [153] Market Data and Key Metrics Changes - Active client firms trading on the platform reached a record 2,083, with 51% being international clients [7][132] - Eurobond trade volume achieved a record, with a 31% share in Open Trading [133] - Trading volume from hedge fund and private bank clients increased by 36% year-over-year, now representing 17% of total credit volume [132] Company Strategy and Development Direction - The company is focusing on innovation through the launch of proprietary data solutions and the Adaptive Auto-X algorithm to enhance trading outcomes for clients [4][5] - The new trading platform integrates unique data products and various trading protocols, aimed at improving client workflows and trading efficiency [129][130] - The company is optimistic about the fixed income market, anticipating increased inflows as the Fed potentially halts rate hikes [50][145] Management's Comments on Operating Environment and Future Outlook - Management noted that the current low volatility environment has impacted trading activity but expressed confidence in the long-term strategy and growth potential [27][150] - The company is excited about the potential for fixed income investments, especially with the anticipated end to rate hikes [50][145] - Management highlighted the importance of regulatory developments, such as T+1 processing, which could favor electronic trading [53][82] Other Important Information - The company paid out approximately$ 107 million in quarterly dividends to shareholders [116] - The balance sheet remains solid with cash and investments totaling $506 million and no outstanding debt [156] - The total addressable market has expanded to$ 7 billion, reflecting significant growth opportunities [151] Q&A Session All Questions and Answers Question: Can you provide insights on the performance of Adaptive Auto-X? - Management indicated that Adaptive Auto-X is in early stages with positive early indications, allowing clients to submit larger parent orders that break into smaller child orders across various protocols [137][138] Question: What are the recent trends in the high-grade business? - Management acknowledged challenges in high-grade market share due to lower volatility and competitive impacts, but noted a year-over-year growth of 13% in portfolio trading [111][150] Question: How is the company interfacing with retail demand? - The company is well-positioned to support retail market growth, particularly through separately managed accounts (SMA) and the Axess IQ platform designed for private wealth firms [91][99]