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MARKETAXESS HOLDINGS INC (MKTX)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $208.6M, down 1% YoY and up 3% QoQ; EBITDA margin rose to 51.5% (vs. 47.8% in Q4), while GAAP EPS fell to $0.40 due to a $54.9M reserve for uncertain tax positions; excluding notable items, EPS was $1.87 .
  • Versus Wall Street consensus (S&P Global), MKTX delivered an EPS beat ex-notable ($1.87 vs. $1.813*) and an EBITDA beat ($106.6M vs. $102.3M*), with revenue slightly below estimates ($208.6M vs. $210.0M*) .
  • Management raised full-year GAAP effective tax rate guidance to 41–42% (from 23.5–24.5%), while maintaining services revenue and capex guidance and refining OpEx to the low end of the prior range; the Board declared a $0.76 dividend .
  • Strategic progress: record ADV across key protocols (Open Trading $4.8B, portfolio trading $1.3B, dealer RFQ $1.8B), with strong April momentum (record total ADV $57.4B and U.S. high-grade market share 19.4%), positioning for near-term share gains as volatility rises .
  • Near-term catalysts: launch of high-touch block solution in U.S. credit, enhanced Mid-X for dealers this quarter, and X-Pro rollout in Europe; April record volumes suggest positive estimate revisions and share trajectory into Q2 .

What Went Well and What Went Wrong

What Went Well

  • Record protocol activity: Open Trading ADV $4.8B (+8% YoY), portfolio trading ADV $1.3B (+78% YoY), dealer RFQ ADV $1.8B (+40% YoY), highlighting diversified growth engines .
  • International strength offset U.S. credit: EM commission +6% and Eurobonds +5% while services revenue reached a record $27.2M (+7% YoY) on CP+ adoption and net new data contracts .
  • CEO quote: “Open Trading activity reached record levels in 1Q25, and we continue to see higher levels of velocity… new capabilities should help drive higher levels of market share in U.S. credit” .

What Went Wrong

  • U.S. credit commission revenue fell 7% on lower fee per million (FPM) and estimated market share; total credit FPM declined to $139 (–10% YoY), pressuring fee capture .
  • GAAP EPS compressed to $0.40 due to a $54.9M reserve tied to a NY state tax court opinion impacting prior-period uncertain tax positions, elevating the GAAP effective tax rate to 84.3% .
  • U.S. municipal market share softened to 6.4% in March and 4.8% in April, partly due to mix shifting to larger-sized notional trades, despite record ADV growth .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$206.7 $202.4 $208.6
Diluted EPS (GAAP, $)$1.90 $1.73 $0.40
Diluted EPS (Ex-Notable Items, $)$1.90 $1.73 $1.87
Operating Income ($USD Millions)$87.1 $80.0 $88.4
EBITDA ($USD Millions)$105.0 $96.7 $107.4
EBITDA Margin (%)50.8% 47.8% 51.5%
Net Income Margin (%)34.6% 32.2% 7.2%
Q1 2025 Actual vs. Consensus (S&P Global)Revenue ($M)EPS (Ex-Notable, $)EBITDA ($M)
Actual$208.6 $1.87 $107.4
Consensus Mean*$210.0*$1.813*$102.3*
Surprise (%)(0.7%)+3.1%+5.0%

Values retrieved from S&P Global.*

Commission Revenue Detail ($USD Thousands)Q1 2024Q4 2024Q1 2025
Variable Transaction Fees – Credit$141,504 $129,351 $135,840
Variable Transaction Fees – Rates$5,166 $7,262 $6,919
Variable Transaction Fees – Other$4,849 $5,235 $5,232
Fixed Distribution Fees – Credit$33,288 $32,849 $33,265
Fixed Distribution Fees – Rates$66 $69 $87
Total Commission Revenue$184,873 $174,766 $181,343
Avg Variable Transaction Fee per Million – Credit ($)$154 $149.59 $139
Avg Variable Transaction Fee per Million – Rates ($)4.79 4.31 4.20
Services Revenue ($USD Millions)Q1 2024Q4 2024Q1 2025
Information Services$11.9 $13.2 $12.9
Post-Trade Services$10.7 $11.0 $11.1
Technology Services$2.8 $3.5 $3.2
Total Services Revenue$25.4 $27.7 $27.2
KPIs – Trading Activity (YoY)Q1 2024Q1 2025
Total Trading Volume ($M)$1,995,410 $2,623,895
Total ADV ($M)$32,632 $42,905
Total Credit ADV ($M)$14,982 $15,922
Total Rates ADV ($M)$17,650 $26,983
U.S. Government Bonds ADV ($M)$17,144 $25,936
Open Trading ADV ($M)—$4,800
KPIs – Fee Capture and ShareQ4 2024Q1 2025
Avg Credit FPM ($/MM)$149.59 $139
Avg Rates FPM ($/MM)4.31 4.20
U.S. High-Grade Market Share (incl. SD PT, Mar/Apr)18.8% (Q4 exit) 18.6% (Q1) ; 19.4% (Apr)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax Rate (GAAP)FY 202523.5%–24.5% 41.0%–42.0% Raised materially
Effective Tax Rate (Ex-Notable)FY 2025—26.0%–27.0% New (non-GAAP context)
Services Revenue GrowthFY 2025Mid-single digits (%) Mid-single digits (%) (no change) Maintained
Total ExpensesFY 2025$505–$525M Low end of $505–$525M Lower end
Capital ExpendituresFY 2025$65–$70M $65–$70M (no change) Maintained
Dividend per ShareQ2 2025—$0.76; payable Jun 4; record May 21 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 & Q4 2024)Current Period (Q1 2025)Trend
U.S. credit market share & fee capturePortfolio trading share improved; fee capture sensitive to duration and mix March exit HG share 20%; April 19.4%; fee capture pressured by PT and mix Improving share into Q2; fee capture mixed
Block trading strategyTargeted block launched in EM/Eurobonds; planning U.S. rollout Rolling out high-touch U.S. block solution; strong client feedback; record block ADV in EM/Eurobonds Execution phase; positive traction
Portfolio trading (PT) & X-ProRecord PT ADV; X-Pro adoption ramping Record PT ADV $1.3B; 85–92% of PT on X-Pro; rolling out X-Pro to Europe Broadening globally
Dealer-initiated channel (RFQ/Mid-X)Early progress in Europe; Mid-X growth Record dealer RFQ ADV; new Mid-X launching this quarter in U.S. Strengthening
Rates business & algosRates ADV strong; Pragma migration planned Single-day record $102B (Apr 9); broader algo adoption; passive execution at 97% Structural growth
Partnerships (ICE Bonds, S&P)ICE bonds connectivity; S&P CP+ partnership announced ICE driving municipal and small-lot credit liquidity; S&P integration timing reiterated Enhancing liquidity/data
Regulatory / Legal—NY state tax court opinion triggered tax reserve and guidance change One-time GAAP impact

Management Commentary

  • CEO: “We generated record daily volumes… record portfolio trading ADV and record block trading ADV across both emerging markets and eurobonds… new capabilities… should help drive higher levels of market share in U.S. credit” .
  • CFO: “We reported diluted EPS of $0.40 or $1.87 per share, excluding notable items… we established a reserve for uncertain tax positions… GAAP tax rate now expected 41%–42%” .
  • CEO on rates algos: “Clients… execute billions in treasuries with 97% passive execution rates” .
  • CEO on PT: “U.S. high-grade portfolio trading market share was 19%… high-yield 18%… 92% of portfolio trades on X-Pro” .
  • CFO on guidance: “Expect OpEx at the low end of $505–$525M; effective tax rate 41%–42% GAAP, 26%–27% ex notable” .

Q&A Highlights

  • Share outlook: Management expects sustained volatility and multiple protocol launches (block, Mid-X, European X-Pro) to drive share gains across channels .
  • Fee capture drivers: Mix shift toward PT and dealer-to-dealer lowers FPM, partially offset by higher duration, greater high-yield activity, and Open Trading utilization; core client-to-dealer RFQ pricing remains stable .
  • PT traction: Benchmark PT enhancements, net hedging, auto spotting, and analytics via X-Pro driving adoption; single-dealer PT can swing monthly share .
  • Alternative liquidity providers: Growing demand from systematic funds and ETF market makers; highest use case is anonymous all-to-all RFQ; settlement-facing limitations remain .
  • Pricing stance: Price by protocol; dealer-to-dealer is price sensitive (Mid-X priced accordingly); client-to-dealer pricing stable; competition centered on workflow/data vs. price .

Estimates Context

  • Revenue: Slight miss vs consensus ($208.6M actual vs. $210.0M*).
  • EPS (normalized/ex-notable): Beat ($1.87 actual vs. $1.813*). GAAP EPS ($0.40) reflects the tax reserve and is not comparable to normalized consensus .
  • EBITDA: Beat ($107.4M actual vs. $102.3M*).

Values retrieved from S&P Global.*

Where estimates may adjust:

  • Positive momentum in April (record ADV, higher HG share) and protocol launches could drive upward revisions to PT/dealer-initiated volumes and EBITDA; however, lower FPM from mix and elevated GAAP tax rate temper EPS trajectories .

Key Takeaways for Investors

  • Near-term trading setup is constructive: April records and rising velocity support Q2 revenue/EBITDA tailwinds, though mix-driven FPM headwinds persist; watch Open Trading and high-yield activity trends .
  • Focus on normalized EPS: Excluding notable items, EPS beat suggests underlying earnings power; GAAP tax reset (41–42%) will compress reported EPS until reserve dynamics normalize .
  • Share recovery in U.S. credit: Block trading rollout, strengthened PT/X-Pro, and Mid-X should lift market share across client- and dealer-initiated channels through 2025 .
  • International and rates diversification: EM/Eurobonds services and rates algos broaden growth drivers, reducing reliance on U.S. corporate credit cycles .
  • Watch fee capture sensitivities: Duration (HG) and high-yield mix support FPM; PT/dealer-to-dealer mix dilutes FPM but is high-margin with lower variable costs .
  • Capital deployment: Ongoing buybacks ($52M YTD through April) and dividend ($0.76) indicate confidence, balanced with RFQ-hub consolidation costs already reflected in OpEx guidance .
  • Tactical lens: Momentum indicators (April share/ADV, protocol launches) are potential positive stock catalysts; macro volatility and rate path remain key variables for mix, volumes, and fee economics .