10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34091

MARKETAXESS HOLDINGS INC.

(Exact name of registrant as specified in its charter)


Delaware		52-2230784
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

55 Hudson Yards, 15th Floor New York, New York		10001
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 813-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol

Name of each exchange on which registered

Common Stock, $0.003 par value

MKTX

NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of October 24, 2022, the number of shares of the Registrant’s voting common stock outstanding was 37,636,823.

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS


		Page
PART I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Financial Condition as of September 30, 2022 and December 31, 2021	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43
PART II — Other Information
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	45

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


	As of
	September 30, 2022			December 31, 2021
	(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	318,699		$	506,735
Cash segregated under federal regulations		50,523			50,159
Investments, at fair value		33,294			36,078
Accounts receivable, net of allowance of $387 and $140 as of September 30, 2022 and December 31, 2021, respectively		87,550			63,881
Receivables from broker-dealers, clearing organizations and customers		584,654			408,346
Goodwill		154,789			154,789
Intangible assets, net of accumulated amortization		99,887			116,377
Furniture, equipment, leasehold improvements and capitalized software, net of accumulated depreciation and amortization		93,512			96,061
Operating lease right-of-use assets		66,662			70,960
Prepaid expenses and other assets		70,177			27,066
Total assets	$	1,559,747		$	1,530,452

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued employee compensation	$	45,217		$	59,719
Payables to broker-dealers, clearing organizations and customers		336,885			229,325
Income and other tax liabilities		28,257			40,456
Accounts payable, accrued expenses and other liabilities		47,362			71,218
Operating lease liabilities		83,286			88,425
Total liabilities		541,007			489,143

Commitments and Contingencies (Note 13)

Stockholders' equity
Preferred stock, $0.001 par value, 4,855,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Common stock voting, $0.003 par value, 110,000,000 shares authorized, 40,907,433 shares and 40,911,506 shares issued and 37,636,921 shares and 37,918,956 shares outstanding as of September 30, 2022 and December 31, 2021, respectively		123			123
Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Additional paid-in capital		330,294			330,262
Treasury stock – Common stock voting, at cost, 3,270,512 shares and 2,992,550 shares as of September 30, 2022 and December 31, 2021, respectively		(320,252	)		(232,712	)
Retained earnings		1,068,662			956,966
Accumulated other comprehensive loss		(60,087	)		(13,330	)
Total stockholders' equity		1,018,740			1,041,309
Total liabilities and stockholders' equity	$	1,559,747		$	1,530,452

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(In thousands, except per share amounts)
Revenues
Commissions	$	153,164		$	142,826		$	482,740		$	475,095
Information services		9,711			9,608			28,916			28,614
Post-trade services		9,000			9,444			28,056			29,553
Other		237			215			686			629
Total revenues		172,112			162,093			540,398			533,891

Expenses
Employee compensation and benefits		44,805			40,878			137,996			129,698
Depreciation and amortization		15,302			13,964			45,716			38,840
Technology and communications		14,169			10,665			38,851			31,245
Professional and consulting fees		7,560			10,847			26,101			31,191
Occupancy		3,381			3,265			10,468			9,882
Marketing and advertising		1,797			1,821			6,535			6,153
Clearing costs		4,211			3,269			13,049			12,335
General and administrative		4,576			3,381			12,479			9,893
Total expenses		95,801			88,090			291,195			269,237
Operating income		76,311			74,003			249,203			264,654
Other income (expense)
Investment income		1,433			108			1,746			322
Interest expense		(138	)		(314	)		(648	)		(676	)
Equity in earnings of unconsolidated affiliate		869			—			1,060			—
Other, net		388			697			7,499			(1,952	)
Total other income (expense)		2,552			491			9,657			(2,306	)
Income before income taxes		78,863			74,494			258,860			262,348
Provision for income taxes		19,556			16,536			67,862			56,645
Net income	$	59,307		$	57,958		$	190,998		$	205,703

Net income per common share
Basic	$	1.58		$	1.54		$	5.10		$	5.49
Diluted	$	1.58		$	1.52		$	5.07		$	5.40

Cash dividends declared per common share	$	0.70		$	0.66		$	2.10		$	1.98

Weighted average shares outstanding
Basic		37,479			37,529			37,464			37,502
Diluted		37,567			38,084			37,666			38,114

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(In thousands)
Net income	$	59,307		$	57,958		$	190,998		$	205,703
Net cumulative translation adjustment and foreign currency exchange hedge, net of tax of $0, $554, $0, and $8, respectively		(20,248	)		(5,149	)		(46,757	)		(5,943	)
Comprehensive income	$	39,059		$	52,809		$	144,241		$	199,760

The accompanying notes are an integral part of these consolidated financial statements.

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock Voting		Additional Paid-In Capital			Treasury Stock – Common Stock Voting			Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
	(In thousands, except per share amounts)
Balance at January 1, 2022	$	123	$	330,262		$	(232,712	)	$	956,966		$	(13,330	)	$	1,041,309
Net income		—		—			—			64,769			—			64,769
Cumulative translation adjustment		—		—			—			—			(5,051	)		(5,051	)
Stock-based compensation		—		8,099			—			—			—			8,099
Exercise of stock options		—		50			—			—			—			50
Withholding tax payments on restricted stock vesting and stock option exercises		—		(20,292	)		—			—			—			(20,292	)
Repurchases of common stock		—		—			(38,800	)		—			—			(38,800	)
Cash dividend on common stock ($0.70 per share)		—		—			—			(26,543	)		—			(26,543	)
Balance at March 31, 2022		123		318,119			(271,512	)		995,192			(18,381	)		1,023,541
Net income		—		—			—			66,922			—			66,922
Cumulative translation adjustment		—		—			—			—			(21,458	)		(21,458	)
Stock-based compensation		—		6,503			—			—			—			6,503
Exercise of stock options		—		86			—			—			—			86
Withholding tax payments on restricted stock vesting and stock option exercises		—		339			—			—			—			339
Repurchases of common stock		—		—			(48,740	)		—			—			(48,740	)
Cash dividend on common stock ($0.70 per share)		—		—			—			(26,391	)		—			(26,391	)
Balance at June 30, 2022		123		325,047			(320,252	)		1,035,723			(39,839	)		1,000,802
Net income		—		—			—			59,307			—			59,307
Cumulative translation adjustment and foreign currency exchange hedge, net of tax		—		—			—			—			(20,248	)		(20,248	)
Stock-based compensation		—		7,351			—			—			—			7,351
Exercise of stock options		—		148			—			—