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 March 31, 2023

or

☐ 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 April 24, 2023, the number of shares of the Registrant’s voting common stock outstanding was 37,669,360.

2

MARKETAXESS HOLDINGS INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

TABLE OF CONTENTS

		Page
PART I — Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Statements of Financial Condition as of March 31, 2023 and December 31, 2022	3
	Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	40
PART II — Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43

2

PART I — Financial Information

Item 1. Financial Statements

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

	As of
	March 31, 2023			December 31, 2022
	(In thousands, except share  and per share amounts)
ASSETS
Cash and cash equivalents	$	332,780		$	430,746
Cash segregated under federal regulations		51,459			50,947
Investments, at fair value		106,674			83,792
Accounts receivable, net of allowance of $767 and $590 as of March 31, 2023     and December 31, 2022, respectively		100,184			78,450
Receivables from broker-dealers, clearing organizations and customers		558,254			476,335
Goodwill		154,789			154,789
Intangible assets, net of accumulated amortization		94,411			98,065
Furniture, equipment, leasehold improvements and capitalized software, net of     accumulated depreciation and amortization		99,133			100,256
Operating lease right-of-use assets		64,904			66,106
Prepaid expenses and other assets		65,874			68,289
Total assets	$	1,628,462		$	1,607,775
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accrued employee compensation	$	24,735		$	56,302
Payables to broker-dealers, clearing organizations and customers		316,274			303,993
Income and other tax liabilities		37,930			28,448
Accounts payable, accrued expenses and other liabilities		46,674			55,263
Operating lease liabilities		81,317			82,676
Total liabilities		506,930			526,682
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 March 31, 2023 and December 31, 2022		—			—
Series A Preferred Stock, $0.001 par value, 110,000 shares authorized, no shares     issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Common stock voting, $0.003 par value, 110,000,000 shares authorized,     40,937,944 shares and 40,918,660 shares issued and 37,669,360 shares     and 37,648,148 shares outstanding as of March 31, 2023 and     December 31, 2022, respectively		123			123
Common stock non-voting, $0.003 par value, 10,000,000 shares authorized, no      shares issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Additional paid-in capital		333,114			345,468
Treasury stock – Common stock voting, at cost, 3,268,584 shares and 3,270,512     shares as of March 31, 2023 and December 31, 2022, respectively		(327,815	)		(328,326	)
Retained earnings		1,148,093			1,101,525
Accumulated other comprehensive loss		(31,983	)		(37,697	)
Total stockholders' equity		1,121,532			1,081,093
Total liabilities and stockholders' equity	$	1,628,462		$	1,607,775
The accompanying notes are an integral part of these consolidated financial statements.

3

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2023			2022
	(In thousands, except per share amounts)
Revenues
Commissions	$	181,991		$	166,113
Information services		11,010			9,809
Post-trade services		9,980			9,912
Other		188			223
Total revenues		203,169			186,057
Expenses
Employee compensation and benefits		52,315			47,756
Depreciation and amortization		16,461			15,174
Technology and communications		14,999			12,192
Professional and consulting fees		7,127			9,621
Occupancy		3,611			3,387
Marketing and advertising		2,995			1,789
Clearing costs		4,545			4,575
General and administrative		5,760			3,459
Total expenses		107,813			97,953
Operating income		95,356			88,104
Other income (expense)
Interest income		4,249			59
Interest expense		(130	)		(173	)
Equity in earnings of unconsolidated affiliate		204			—
Other, net		(1,484	)		2,429
Total other income (expense)		2,839			2,315
Income before income taxes		98,195			90,419
Provision for income taxes		24,567			25,650
Net income	$	73,628		$	64,769
Net income per common share
Basic	$	1.96		$	1.73
Diluted	$	1.96		$	1.71
Cash dividends declared per common share	$	0.72		$	0.70
Weighted average shares outstanding
Basic		37,478			37,384
Diluted		37,645			37,824
The accompanying notes are an integral part of these consolidated financial statements.

4

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended March 31,
	2023			2022
	(In thousands)
Net income	$	73,628		$	64,769
Cumulative translation adjustment		5,755			(5,051	)
Net unrealized gain (loss) on securities available-for-sale,    net of tax of $(14) and $0, respectively		(41	)		—
Comprehensive income	$	79,342		$	59,718
The accompanying notes are an integral part of these consolidated financial statements.

5

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, 2023	$	123	$	345,468		$	(328,326	)	$	1,101,525		$	(37,697	)	$	1,081,093
Net income		—		—			—			73,628			—			73,628
Cumulative translation adjustment		—		—			—			—			5,755			5,755
Unrealized net gain (loss) on    securities available-for-sale,    net of tax		—		—			—			—			(41	)		(41	)
Stock-based compensation		—		7,488			—			—			—			7,488
Reissuance of treasury stock		—		(57	)		511			—			—			454
Exercise of stock options		—		707			—			—			—			707
Withholding tax payments on    restricted stock vesting    and stock option exercises		—		(20,492	)		—			—			—			(20,492	)
Cash dividend on common stock    ($0.72 per share)		—		—			—			(27,060	)		—			(27,060	)
Balance at March 31, 2023	$	123	$	333,114		$	(327,815	)	$	1,148,093		$	(31,983	)	$	1,121,532
The accompanying notes are an integral part of these consolidated financial statements.

6

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CONTINUED)

(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

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

7

MARKETAXESS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2023			2022
	(In thousands)
Cash flows from operating activities
Net income	$	73,628		$	64,769
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,461			15,174
Amortization of operating lease right-of-use assets		1,368			1,596
Stock-based compensation expense		7,488			8,099
Deferred taxes		(1,433	)		(643	)
Foreign currency transaction (gains) losses		1,699			—
Other		(2,532	)		(1,229	)
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(21,935	)		(11,699	)
(Increase) in receivables from broker-dealers, clearing organizations and customers		(52,549	)		(296,015	)
Decrease (increase) in prepaid expenses and other assets		3,163			(2,445	)
(Increase) in trading investments		(419	)		—
(Increase) in mutual funds held in rabbi trust		(630	)		(117	)
(Decrease) in accrued employee compensation		(31,567	)		(33,553	)
Increase in payables to broker-dealers, clearing organizations and customers		12,281			229,151
Increase in income and other tax liabilities		10,904			3,049
(Decrease) increase in accounts payable, accrued expenses and other liabilities		(6,838	)		1,932
(Decrease) in operating lease liabilities		(1,562	)		(1,799	)
Net cash provided by (used in) operating activities		7,527			(23,730	)
Cash flows from investing activities
Available-for-sale investments
Proceeds from maturities and sales		1,048			—
Purchases		(22,895	)		—
Purchases of furniture, equipment and leasehold improvements		(217	)		(1,396	)
Capitalization of software development costs		(10,690	)		(9,425	)
Net cash (used in) investing activities		(32,754	)		(10,821	)
Cash flows from financing activities
Cash dividend on common stock		(28,357	)		(27,425	)
Exercise of stock options		707			50
Withholding tax payments on restricted stock vesting and stock option exercises		(20,492	)		(20,292	)
Repurchases of common stock		—			(38,800	)
Proceeds from short-term borrowings		50,000			100,000
Repayments of short-term borrowings		(50,000	)		(100,000	)
Net cash (used in) financing activities		(48,142	)		(86,467	)
Effect of exchange rate changes on cash and cash equivalents		3,345			(4,356	)
Cash and cash equivalents including restricted cash
Net decrease for the period		(70,024	)		(125,374	)
Beginning of period		572,664			625,567
End of period	$	502,640		$	500,193
Supplemental cash flow information
Cash paid for income taxes	$	11,660		$	8,487
Cash paid for interest		187			134
Non-cash activity
Operating lease right-of-use assets obtained in exchange for operating lease liabilities		—			91
The accompanying notes are an integral part of these consolidated financial statements.

8

MARKETAXESS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Principal Business Activity