NEW YORK, Oct 27, 2020 (GLOBE NEWSWIRE via COMTEX) -- Third Quarter Financial Highlights
All comparisons versus third quarter 2019.
MarketAxess Holdings Inc. /zigman2/quotes/202710814/composite MKTX -12.01% , the operator of a leading electronic trading platform for fixed-income securities, and the provider of market data and post-trade services for the global fixed-income markets, today announced results for the quarter ended September 30, 2020.
"It is gratifying to see the strength in market share trends and Open Trading volumes in spite of the return to more normal credit market conditions in the third quarter," said Rick McVey, Chairman and CEO of MarketAxess. "Trading automation and lower transaction costs on MarketAxess are driving a sustainable change in trading behavior among institutional market participants. Market share gains fueled strong revenue and earnings growth with higher operating margins during the quarter."
Third Quarter Results
Total revenues for the third quarter of 2020 increased 25% to $164.0 million, compared to $131.6 million for the third quarter of 2019. Operating income was $87.8 million, compared to $66.0 million for the third quarter of 2019, an increase of 33%. Operating margin was 53.5%, compared to 50.1% for the third quarter of 2019. Net income totaled $67.8 million, or $1.78 per share on a diluted basis, compared to $54.0 million, or $1.42 per share, for the third quarter of 2019.
Commission revenue for the third quarter of 2020 increased 26% to $150.6 million, compared to $119.9 million for the third quarter of 2019. Variable transaction fees increased 28% to $123.2 million for the third quarter of 2020, compared to variable transaction fees of $96.0 million for the third quarter of 2019. U.S. high-grade trading volume as a percentage of FINRA's high-grade TRACE trading volume increased to an estimated 22.2% for the third quarter of 2020, compared to an estimated 20.2% for the third quarter of 2019. Variable transaction fees in the third quarter of 2020 includes approximately $2.4 million of U.S. Treasuries trading commissions related to the November 2019 acquisition of LiquidityEdge LLC, now operating as MarketAxess Rates.
All other revenue, which consists of information services, post-trade services and other revenue, increased 14% to $13.4 million, compared to $11.7 million for the third quarter of 2019. The increase in all other revenue was principally due to new data sales and introduction of new Securities Finance Transaction Regulation ("SFTR") reporting services of $1.1 million and the favorable impact of the weaker U.S. dollar of $0.6 million.
Total expenses for the third quarter of 2020 increased 16% to $76.2 million, compared to $65.6 million for the third quarter of 2019. The increase in total expenses was largely due to higher employee compensation and benefit costs, mainly due to an increase in headcount, of $4.9 million, depreciation and amortization of $2.3 million, clearing costs, mainly due to increased Open Trading activity and U.S. Treasury matched-principal trading, of $2.1 million, and professional and consulting fees of $1.3 million offset by a $1.4 million decrease in marketing and advertising expense. MarketAxess Rates expenses, including amortization of acquired intangibles expense, totaled $3.3 million during the third quarter of 2020.
The effective tax rate for the third quarter of 2020 was 23.0%, compared to 19.8% for the third quarter of 2019. The income tax provision for the third quarter of 2020 and 2019 reflected $5.9 million and $3.5 million, respectively, of excess tax benefits related to share-based compensation awards. In the third quarter of 2020, the Company recorded an additional provision for unrecognized tax benefits of $4.8 million.
Employee headcount was 599 as of September 30, 2020 compared to 527 as of December 31, 2019 and 511 as of September 30, 2019. The increase in headcount was due to the continued investment in the Company's growth initiatives, including geographic expansion, trading automation, new trading protocols and the transition to self-clearing.
The Company's board of directors declared a cash dividend of $0.60 per share of common stock outstanding, to be paid on November 25, 2020 to stockholders of record as of the close of business on November 11, 2020.
A total of 8,748 shares were repurchased in the third quarter of 2020 at a cost of $4.2 million.
Balance Sheet Data
As of September 30, 2020, total assets were $1.2 billion and included $341.6 million in cash, cash equivalents and investments. Total stockholders' equity as of September 30, 2020 was $897.5 million.
Non-GAAP Financial Measures and Other Items