MarketAxess Holdings Inc. (NASDAQ:MKTX) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 25, 2018 • 10:00 am ET


MarketAxess Holdings Inc. (NASDAQ:MKTX) Q1 2018 Earnings Conference Call - Preliminary Transcript


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Ladies and gentlemen thank you for standing by. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference is being recorded, April 25th, 2018.

I would now like to turn the call over to Dave Cresci, Investor Relations Manager at MarketAxess. Please go ahead, sir.

Dave Cresci

Good morning, and welcome to the MarketAxess First Quarter 2018 Conference Call. For the call, Rick McVey, Chairman and Chief Executive Officer will review the highlights for the quarter, and will provide an update on trends in our businesses. And then, Tony DeLise, Chief Financial Officer will review the financial results.

Before I turn the call over to Rick, let me remind you that today's call may include forward-looking statements. These statements represent the Company's belief regarding future events that, by their nature are uncertain. The Company's actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For discussion of some of the risks and factors that could affect the Company's future results, please see the descriptions of risk factors in our Annual Report on Form 10-K for the year-ended December 31st, 2017. I would also direct you to read the forward-looking statement disclaimer in our quarterly earnings release, which was issued earlier this morning and is now available on our website.

Now, let me turn the call over to Rick.

Rick McVey

Good morning. And thank you for joining us to discuss our first quarter 2018 results. This morning, we reported first quarter results driven by record trading volume of $465 billion up 18% compared to Q1, 2017. Additionally, volume records would set this quarter across each of our four core products. Our estimated US high grade market share also reached a record of 18% this quarter up from 15.9%. On the back of strong trading volumes, first quarter revenues were a record $115 million, up 11% compared to Q1, 2017. Operating income for the quarter was $60 million up 9% from a year ago and diluted EPS was up 14% to a new high of $1.27. Expenses of $54.5 million were up 14% including $1.7 million in duplicate rent expense for Hudson Yards. As per the double rent charge, EPS would have been up 17% year-over-year.

Open trading adoption continues to accelerate and reached record volume of $81 billion up 38%. Additionally, the trading volume with international clients reached a record $130 billion this quarter, representing an increase of 30%.

Slide 4 provides an update on market conditions. Overall secondary trading conditions improved modestly in the first quarter. Interest rate moved higher and volatility improved in both interest rate and credit spreads. Overall trade's high grade market volumes in Q1 were relatively flat year-on-year while high yield trades volumes were down 4%. As a result, our trading volume and revenue growth was driven primarily by market share gains. New issuance was down 13% versus last years first quarter. US credit mutual fund in close continue to be strong. We are pleased with our