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MARKETAXESS HOLDINGS INC (MKTX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $202.4M (+3% YoY; -2% QoQ) and diluted EPS was $1.73 (-6% YoY; -9% QoQ); EBITDA margin was 47.8% (down 220 bps YoY) as U.S. credit share softened while rates and international credit offset mix headwinds .
  • Commission revenue grew 2% YoY to $174.8M, with strength in Emerging Markets (+18%) and Eurobonds (+10%) offset by lower U.S. high-grade and high-yield share; Services revenue rose 10–41% across information/post-trade/technology, aided by Pragma .
  • Record rates performance: rates commission revenue rose 53% YoY on record total rates ADV of $27.1B (+64% YoY) .
  • 2025 outlook introduced: services revenue mid-single digit growth; expenses $505–$525M (~8% increase at midpoint); ETR 23.5–24.5%; capex $65–$70M; quarterly dividend raised to $0.76 (payable Mar 5, 2025) .
  • Management is prioritizing market share recovery via block trading rollout (U.S. credit launch targeted in H1/25), portfolio trading enhancements (global benchmark pricing), and dealer-initiated solutions (Dealer RFQ on X-Pro; Mid-X migration to Pragma) .

What Went Well and What Went Wrong

What Went Well

  • Record rates revenue (+53% YoY) and record total rates ADV (+64% YoY) underpinned by client adoption of rates algos and strong volumes .
  • International credit momentum: EM ADV +18% YoY and Eurobonds ADV +13% YoY; municipal bonds set a record ADV (+15% YoY) with market share up to 7.1% (+150 bps YoY) .
  • CEO: “2024 was a build year, and 2025 will be a year of delivery and execution,” highlighting block trading launch in EM/Eurobonds with early positive signs and targeted block roll-out for U.S. credit in H1/25 .

What Went Wrong

  • U.S. high-grade and high-yield estimated market share fell YoY (HG: 18.4% vs 20.9%; HY: 13.4% vs 17.2%) amid lower spread volatility and mix shift toward blocks; portfolio trading share dipped QoQ (TRACE PT share 16.2% vs 20.0% in Q3) .
  • Other income declined to $4.6M from $6.8M due to a ~$1.9M unrealized loss on U.S. Treasuries (vs. +$0.9M gain in prior year); effective tax rate rose to 23.0% from 16.9% on lower one-time tax benefits YoY .
  • Total credit fee capture was pressured YoY by mix (lower HY activity, portfolio trading), though broadly stable QoQ; total credit FPM was ~$150 (prelim) in 4Q24 vs $156 in 4Q23 per monthly detail .

Financial Results

P&L summary (oldest → newest)

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$197 $207 $202
Operating Income ($M)$77 $87 $80
Net Income ($M)$70 $71 $65
Diluted EPS ($)$1.84 $1.90 $1.73
Net Income Margin (%)35.3% 34.6% 32.2%
EBITDA ($M)$99 $105 $97
EBITDA Margin (%)50.0% 50.8% 47.8%

Note: Q2 2024 for trend context (not shown in table): revenue $198M and diluted EPS $1.72 .

Revenue mix (oldest → newest)

Revenue Line ($000s)Q4 2023Q3 2024Q4 2024
Commissions171,891 180,392 174,766
Information Services11,917 12,960 13,155
Post-trade Services10,950 10,382 10,975
Technology Services2,490 2,981 3,508
Total Revenues197,248 206,715 202,404

Trading volumes and market share (oldest → newest)

KPIQ4 2023Q3 2024Q4 2024
Total ADV ($M)$29,641 $40,516 $41,030
Total Credit ADV ($M)$13,108 $14,116 $13,883
U.S. HG ADV ($M)$6,215 $7,027 $6,454
U.S. HY ADV ($M)$1,653 $1,278 $1,345
EM ADV ($M)$2,927 $3,333 $3,459
Eurobonds ADV ($M)$1,767 $1,891 $2,001
Municipals ADV ($M)$539 $577 $620
Total Rates ADV ($M)$16,533 $26,400 $27,147
U.S. HG est. share (%)20.9% 19.5% 18.4%
U.S. HY est. share (%)17.2% 13.0% 13.4%
Municipals est. share (%)5.6% 8.7% 7.1%
U.S. Gov. Bonds est. share (%)2.0% 2.6% 2.8%
Portfolio Trading ADV ($M)n/a$1,100 $1,100
Open Trading share of credit (%)36% 35% 35%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Services revenue growthFY 2025n/aMid-single digits (%) New
Total expensesFY 2025n/a$505–$525M (~+8% at midpoint) New
Effective tax rateFY 2025n/a23.5%–24.5% New
Capital expendituresFY 2025n/a$65–$70M New
Dividend per share (quarterly)Q1 2025$0.74 (Q4 2024 declared) $0.76 (payable Mar 5, 2025) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
High-touch block tradingQ2: Building high-touch with AI Dealer Select; targeting blocks to reduce info leakage . Q3: Initial targeted block solution piloted; 2025 ramp expected .Launched in EM/Eurobonds with early traction; U.S. credit launch targeted H1/25; >$1.2B block volume to date; ~90% hit rate in Eurobond targeted blocks Execution phase; scaling globally
Portfolio trading competitivenessQ2: Rolling out X-Pro; growing PT adoption . Q3: TRACE PT share ~20%; benchmark PT features added .TRACE PT share 16.2% (flat overall PT penetration); global benchmark pricing launched; aiming feature-complete in H1/25 Competitive catch-up; mixed QoQ share
Dealer-initiated channel (Dealer RFQ, Mid-X)Q3: Dealer RFQ/Mid-X investments; Europe traction .Dealer RFQ to X-Pro; Mid-X migration to Pragma in 1H/25 Product modernization
AI/data (CP+, AI Dealer Select)Q2: CP+ central to automation; AI Dealer Select; data powering workflows .AI Dealer Select key for blocks; CP+ expanding; S&P GI evaluated pricing partnership complements data stack (announced late Oct) Broader data moat
Rates platformQ2: Building algos; rates pool growth . Q3: Record rates revenue .Record rates ADV; migrating algos to Pragma; planning RFQ launch in 2025 Strong growth; product expansion
Municipals & retail connectivityQ2: ICE partnership to connect odd-lot liquidity . Q3: Record muni share; CP+ for munis launching Dec .CP+ extended to munis (Dec. 5); record muni ADV and 7.1% share in Q4 Data-led muni expansion

Management Commentary

  • “2025 will be a year of delivery and execution… across our leading client-initiated channel, the portfolio trading channel and the dealer-initiated channel” (CEO) .
  • “Since our launch in emerging markets… we’ve done over $1.2B in block trades… about a 90% hit rate in our Eurobond targeted block trading tool” (CEO) .
  • “Total services revenue… is expected to grow in the mid-single digits in 2025… expenses $505–$525M… ETR 23.5–24.5%… capex $65–$70M” (CFO) .
  • “The factors that are a struggle for our [all-to-all] model have been very low volatility and very tight spreads… key for 2025 is offering multiple protocols appropriate in multiple environments” (CEO) .

Q&A Highlights

  • Block strategy and dealer adoption: Dealers favor targeted inquiries (reduced “winner’s curse”); U.S. high-grade/high-yield block launch targeted beginning of Q2’25 with one-click to dealers .
  • Market share recovery drivers: Multiple protocols (PT, blocks, all-to-all, automation) and dealer solutions (Mid-X, X-Pro for dealers) scheduled through 1H’25 to impact share .
  • Fee per million sensitivities: Duration and yields are key drivers; a 1-year increase in weighted-average years to maturity can add ~$15 per million; 100 bps lower yields add ~$3–$5 per million (CFO) .
  • Rates roadmap: Migrating client algos to Pragma, advancing net hedging adoption, and introducing RFQ alongside algos to create a hybrid offering in 2025 .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue could not be retrieved at this time due to S&P Global daily request limits. We will update beat/miss analysis once access is restored.

Key Takeaways for Investors

  • Core print modest: slight YoY revenue growth and EPS decline reflect mix (lower U.S. credit share; HY softness) despite strong rates and international credit expansion .
  • 2025 is the execution catalyst year: feature-complete PT, U.S. block launch, and upgraded dealer workflows (X-Pro/Mid-X) are targeted for 1H’25 and should be watched for share inflection .
  • Data moat expanding: CP+ into munis, AI Dealer Select for blocks, and S&P partnership on evaluated pricing reinforce differentiated analytics and monetization opportunities .
  • Rate environment leverage: Elevated rates/volatility support rates revenues; duration/yield shifts can lift fee capture, offering upside if macro cooperates (duration and yield sensitivities noted by CFO) .
  • Capital returns and balance sheet: Dividend raised to $0.76; $699M of cash/corporate bonds/USTs at year-end; no debt; $220M authorization remaining as of Jan 31, 2025 .
  • Near-term watch items: Monthly share updates (HG/HY), PT share and hit rates, block rollout milestones, Open Trading share in volatility, and expense ramp as products go live .

Appendix: Additional Details and Cross-Checks

  • Cash, investments, and buybacks: $698.6M cash/corp bonds/USTs at Dec 31, 2024; 63,873 shares repurchased in Q4 for $16.4M; $220M remaining authorization as of Jan 31, 2025 .
  • Quarterly dividend: $0.76 per share payable Mar 5, 2025 (record Feb 19, 2025) .
  • Q4 operating expenses: $122.4M (+2% YoY); FX added ~$0.9M .
  • Monthly cadence (Dec 2024): Total ADV $32.0B; Credit ADV $12.3B; Rates ADV $19.8B; preliminary total credit FPM ~$148 .