• Total Revenue: $202 million for Q4 2024, compared to $197 million in the prior year.
• Commission Revenue: $175 million, up from $172 million in the prior year.
• Information Services Revenue: $13 million, up 10% with a $300,000 FX benefit.
• Post Trade Services Revenue: $11 million, flat versus the prior year with a $200,000 FX benefit.
• Technology Services Revenue: $4 million, increased 41% due to higher Pragma-related license fees.
• Diluted Earnings Per Share: $1.73.
• Operating Expenses: $122 million, increased 2% compared to the prior year.
• Free Cash Flow: $328 million over the trailing 12 months, a 6% increase over last quarter.
• Cash and Investments: $699 million as of December 31, 2024.
• Share Repurchases: 341,000 shares for $75 million in 2024, including 64,000 shares in Q4 for $16 million.
• 2025 Expense Guidance: Expected range of $505 million to $525 million.
• 2025 Capital Expenditures Guidance: Expected range of $65 million to $70 million.

• Warning! GuruFocus has detected 3 Warning Signs with MKTX.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• MarketAxess Holdings Inc (NASDAQ:MKTX) reported a 9% growth in revenue for 2024, marking the strongest annual revenue growth rate since 2020.
• The company achieved record commission revenue and record services revenue, with significant growth in portfolio trading and block trading.
• MarketAxess Holdings Inc (NASDAQ:MKTX) launched a block trading solution in emerging markets and Eurobonds, with plans to expand to US credit in 2025.
• The Rates business saw substantial growth, with trading ADV increasing from $2.9 billion per day in Q1 2024 to $11.4 billion in Q4 2024.
• The company is focused on expanding its market share across client-initiated, portfolio trading, and dealer-initiated channels, with a clear strategy for 2025.

Negative Points

• MarketAxess Holdings Inc (NASDAQ:MKTX) faced challenges with US credit market share, particularly in high-grade market share, which was disappointing in January.
• The company experienced a 19% decline in US high-yield commission revenue, attributed to lower levels of credit spread volatility.
• Total other income decreased due to mark-to-market losses on the US treasury portfolio, impacting financial results.
• Operating expenses increased by 2% compared to the prior year, driven by higher employee compensation and benefits, tech and communications, and marketing costs.
• The company anticipates an 8% growth in total expenses for 2025, which may impact profitability if revenue growth does not keep pace.

Q & A Highlights

Q: Can you discuss the block trading launch in the US and why you started with emerging markets and Eurobonds first? How important is dealer involvement for success in block trading? A: Christopher Concannon, CEO, explained that the launch in emerging markets and Eurobonds was due to the strong pre-trade analytics available in those markets. The key to successful block trading is minimizing information leakage, which is achieved by targeting a specific dealer with a high likelihood of execution. Dealers appreciate being part of a smaller list for inquiries, reducing the "winner's curse" effect. The US launch is expected in Q2, with positive feedback from both clients and dealers.

Q: What gives you confidence in growing market share in high-grade credit, and are current protocols sufficient for this growth? A: Concannon highlighted favorable macro conditions, such as positive inflows into fixed income and a robust new issue market. The company is focused on offering multiple protocols suitable for different market environments, including portfolio trading, block trading, and automation. The upcoming product rollouts in 2025 are expected to drive market share growth.

Q: Where do you see opportunities for further electronification in the bond market? A: Concannon identified block trading and the retail space as significant opportunities. The emerging markets also present a large potential for electronification, with less than 5% currently penetrated. Data is crucial for this transition, and MarketAxess is focused on expanding its data footprint to support these efforts.

Q: How do you view the high-yield market, given recent market share declines? A: Concannon noted that the high-yield market faced challenges in 2024 due to tight spreads and low volatility, impacting ETF market makers. However, inflows into high-yield funds remain strong, and portfolio trading is gaining traction. The upcoming block trading solution is expected to address information leakage concerns and improve market share.

Q: What are your ambitions for the rates platform, and how is the net spotting tool performing? A: Concannon emphasized the importance of offering both electronic algorithmic solutions and traditional RFQ in the rates market. The company is launching its algos on the Pragma platform, enhancing client capabilities. The net hedging tool continues to grow, providing liquidity to large banks. The rates platform is expected to expand further in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.