MarketAxess Earnings Call: Growth Amid Challenges

Marketaxess ((MKTX)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for MarketAxess painted a complex picture of the company’s financial health and strategic direction. While there was strong revenue growth outside the U.S. credit market and significant advancements in key trading channels, the call also highlighted challenges such as flat commission revenue and an increased tax rate. The overall sentiment was balanced, reflecting both positive developments and areas of concern.

Strong Revenue Growth Outside U.S. Credit

MarketAxess reported a robust 10% revenue growth outside the U.S. credit market, showcasing the company’s ability to expand its footprint and capitalize on opportunities in international markets. This growth is a testament to the company’s strategic focus on global diversification.

Significant Growth in Key Trading Channels

The earnings call highlighted impressive growth in key trading channels. The client-initiated channel experienced a 10% growth in block trading average daily volume (ADV) across U.S. credit, emerging markets, and Eurobonds. Additionally, the portfolio trading channel saw a 20% increase in total portfolio trading ADV, with record U.S. high-yield ADV. The dealer-initiated channel also showed an 18% increase in ADV.

Launch of New Trading Protocols

MarketAxess introduced new trading protocols, including closing auctions for the fixed income market. This initiative is expected to provide an end-of-day liquidity solution, enhancing the company’s service offerings and potentially boosting trading volumes.

Global Expansion and Diversification

The company’s global expansion efforts are paying off, with 36% of global credit trading volume now driven by clients outside North America, up from 29% in 2020. This diversification is crucial for mitigating risks associated with regional market fluctuations.

Improved Cash Flow and Share Repurchase

MarketAxess reported generating $385 million in free cash flow over the trailing 12 months. The company also repurchased 595,000 shares year-to-date through October 2025, totaling $120 million, reflecting a commitment to returning value to shareholders.

Challenges in U.S. Credit Revenue

Despite a slight increase in revenue to $209 million for the quarter, U.S. credit revenue growth was hampered by the rise of new trading protocols and smaller-sized trades moving to portfolio trades at lower capture rates.

Flat Total Commission Revenue

The earnings call revealed that total commission revenue remained flat compared to the previous year, with a notable 9% decline in U.S. high-grade and stagnant growth in U.S. high yield.

Lower Total Credit Commissions

Total credit commission revenue decreased by 2% compared to the prior year, indicating challenges in maintaining commission levels amid evolving market dynamics.

Increased Effective Tax Rate

The effective tax rate rose to 27.1%, up from 23% in the previous year, impacting the company’s net income and highlighting the need for strategic tax planning.

Forward-Looking Guidance

MarketAxess’s forward-looking guidance emphasizes adapting to challenging market conditions and addressing competitive pressures, particularly in U.S. credit. The company aims to drive higher revenue growth through faster technology enhancements while maintaining strong expense control, with full-year expenses expected at the low end of $505 million to $525 million.

In summary, the MarketAxess earnings call presented a balanced view of the company’s current position and future prospects. While there are significant growth areas, particularly outside the U.S. credit market and in key trading channels, challenges such as flat commission revenue and an increased tax rate remain. The company’s strategic initiatives and global expansion efforts are promising, but continued focus on technology and expense management will be crucial for sustained growth.