MarketAxess Holdings Inc.’s (MKTX – Free Report) revenues have been consistently growing since 2005 (except 2008 when revenues declined just 0.6%). Revenues have witnessed a CAGR of 13% from 2012-2017. This top-line growth was primarily driven by persistent increase in commission (which forms the lion’s share of total revenues) received on trading volumes. The same was up 11.4% in the first quarter of 2018. The company has been successful in increasing its trading volumes by way of inorganic and organic strategies.
Its efforts of pursuing international opportunities, a compelling economic market model and a diversified product suite of the coveted U.S. high-grade floating rate and other credit bonds to broaden the scope of volumes growth for MarketAxess, going forward, will further drive commission revenues. The company is also witnessing an uptick in post-trade and services revenues mainly due to MiFID II implementation fees.
MarketAxess supplements its organic growth by entering into strategic alliances, or by acquiring businesses or technologies, which enable it to enter new markets, provide new products or services. Some of the notable deals to this end included the acquisition of Xtrakter Limited which provided the company with an expanded set of technology solutions; a strategic alliance with BlackRock, Inc. which improved the range of trading connections available to global credit market participants; agreement with S&P Dow Jones Indices to jointly develop indices that will track the most liquid segments of the U.S. corporate bond market. The company’s inorganic growth which has also aided top-line growth remains impressive.
The company has been able to fund its acquisition backed by its strong liquidity position. Notably, it has been generating free cash flow from past several years. Strong liquidity not only mitigates balance-sheet risks, but also paves the way for an accelerated capital deployment in employees, trading platform, new products,