MarketAxess (MKTX) 6 Nov 24 2024 Q3 Earnings call transcript

In the latest earnings call, MarketAxess Inc. (MarketAxess), a leading electronic trading platform for fixed-income securities, reported a strong third quarter, showcasing a 20% revenue growth driven by increased market volumes and strategic initiatives. The company's focus on cost management and operational efficiency, alongside its expansion into emerging markets and strategic partnerships, underscore its robust financial health and growth prospects.

Strategic Highlights

MarketAxess has been executing its strategy effectively, driving a 20% revenue growth in Q3. This is primarily attributed to the strong growth in market volumes, coupled with disciplined expense management that has unlocked powerful operating leverage. The company's diversification into emerging markets, particularly in local markets, has been a significant growth driver, contributing to a 37% increase in commission revenue from non-US credit.

Market Volumes and Share

The company reported robust market volumes, with total credit volume setting a record of over $1 trillion in October. The decline in US high-grade market share was attributed to lower portfolio trading and client shift to large block trading, which is being targeted with the recent launch of a high-touch strategy in XPro. Despite this, MarketAxess remains optimistic about its market share growth in US credit, emphasizing the powerful diversification story.

Emerging Markets Opportunity

MarketAxess's expansion into emerging markets is a strategic priority, with a focus on local markets and the launch of a block trading solution in the fourth quarter. The company is seeing strong growth in emerging markets trading activity, with record LatAm and APAC emerging markets trading volume up 51% and 30%, respectively. This strategic move is expected to further strengthen MarketAxess's market position and drive future growth.

Strategic Partnerships

The company's strategic partnership with S&P Global to combine MarketAxess's CP+ market data with S&P's global evaluated bond pricing solution is a significant move. This partnership underscores MarketAxess's commitment to enhancing its product offerings and providing clients with valuable insights. Additionally, the recent launch of a targeted block trading solution is expected to attract larger block sizes, further expanding the company's market share.

Operational Efficiency and Expense Management

MarketAxess's focus on operational efficiency and cost management has been a key factor in its strong financial performance. The company's disciplined approach to expense management has resulted in a 30% increase in diluted earnings per share, demonstrating the power of its cost structure.

Looking Ahead

MarketAxess is well-positioned for continued growth, with a clear strategy to return to market share growth in US credit while delivering growth across the global fixed income market. The company's expanding emerging markets franchise is a key growth cylinder, with a focus on targeted block trading and strategic partnerships. MarketAxess's commitment to innovation, operational efficiency, and strategic expansion is expected to drive future growth and maintain its competitive edge in the fixed-income market.

In conclusion, MarketAxess's third-quarter earnings call highlights a strong financial performance driven by strategic initiatives, operational efficiency, and a focus on growth opportunities. The company's strategic moves, particularly in emerging markets and block trading, position it well for future growth. With a disciplined approach to expense management and a clear strategic direction, MarketAxess is well-positioned to capitalize on the opportunities in the fixed-income market and deliver value to its shareholders.