MarketAxess Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Market Access First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a Q&A session. If you'd like to ask a question during that time, please press star followed by one on your telephone keypad. As a reminder, this conference call is being recorded on May 7, 2025. I would now like to turn the call over to Steve Davidson, head of investor relations at Market Access. Please go ahead, sir.

Good morning and welcome to the Market Access first quarter 2025 earnings conference call. For the call, Chris Concanon, chief executive officer, will provide you with an update on our strategy and our trading businesses. And Eileen Fizell-Buehler, chief financial officer, will review the financial results. Before I turn the call over to Chris, 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 a discussion of some of the risks and factors that could affect the company's future results, Please see the description of risk factors in our annual report on Form 10-K for the year ended December 31, 2024. 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 Chris.

Good morning, and thank you for joining us to review our first quarter 2025 financial results. I am pleased to report that we are seeing the benefits of our technology investments in our first quarter results, as shown on slide three of my strategic update. In terms of revenue generation, our product and geographic diversification continue to pay off with record commission revenue in our international and new product areas like emerging markets, municipals, and U.S. government bonds. We are very pleased with the growth we generated in U.S. government bonds in the quarter, including a single-day trading record of $102 billion on April 9th. The strong growth in U.S. government bonds is being driven by increased velocity, but also by more institutional clients leveraging our rates algos, even during volatile periods. These clients are leveraging new algos to work larger block orders with low market impact over a specific time range. And the results have been impressive. Clients are executing billions in treasuries with 97% passive execution rates. That means institutional clients are not crossing the spread 97% of the time using our algos. During the week of April 7th, clients leveraged our US treasury algos to execute 36 billion or 11% of our trading volume that week. We expect to continue to expand our ALGO suite for rates, and we anticipate launching an enhanced RFQ solution in the near future. Services revenue growth was also strong at 7%. In terms of expenses, we continue to show cost discipline with expenses up only 2%, which also benefited from lower variable costs during the quarter. On the capital front, we have been more opportunistic with our share repurchases as we move beyond just offsetting dilution from stock-based compensation. Our challenge has been U.S. credit market share across key protocols, which partially offset the growth we generated in other areas in the quarter. However, the exit rate in March was very encouraging with U.S. high-grade estimated market share increasing to 20%, the highest level since December 2023, driven by strong market share gains across the portfolio trading and dealer initiated channels. On slide four, we highlight the key performance indicators for our trading businesses across channels in the first quarter. As this slide clearly shows, except for U.S. credit market share, the key performance indicators across our platform are largely green in the quarter, reflecting the underlying fundamental strengths of our business. First, across our client-initiated channel, we generated record US credit ADD of 2% to $9 billion. We saw strong growth in international products with record ADD of $6 billion, up 11%. EM local markets are the largest opportunity in EM from an addressable market perspective. We produce record local markets ADD of over 1.5 billion, up 8%. Our performance in municipal bonds is also a positive example of our product diversification strategy with ADD up 42%. We are very pleased with the liquidity coming from our partnership with ICE bonds, which started with municipal and has now extended to U.S. high yield and U.S. investment grade. We experienced another quarter of strong growth in automation with record trade volumes of $110 billion, up 17%. We had 249 active automation clients in the first quarter. We now have 80 clients enabled for our algo suite, up from 25 in the prior year. Open trading ADD hit a record $5 billion in the quarter, an increase of 8%. Open trading share of total credit was 38% in April, and open trading volume hit record levels during the second week of the month across credit markets. Our share of blocks in U.S. high grade was just over 11%, up slightly from the prior year. In the portfolio trading channel, we generated record total PTADV of 1.3 billion and record U.S. credit PTADV of $1.1 billion, with market share of 19%. Last, in the dealer-initiated channel, dealer RFQ and mid-XADD was a record $1.9 billion, representing a 45% increase over the prior year. As promised on the last earnings call, on slides five and six, we want to update you on how we are executing across the three critical channels we are attacking to grow U.S. credit market share. First, in the client-initiated channel, we made progress with our block trading solution. We registered record total block trading ADD in U.S. high-grade, emerging markets, and euro bonds in the first quarter. Year-to-date through April, block trading in U.S. high-grade is running up 27%. U.S. high yield is up 19%. Emerging markets is up 22%. And euro bonds is up 71%. Our cumulative block trading volume since the launch of our targeted block trading solution in emerging markets and Eurobonds was $4 billion through April 2025. We are rolling out our full high-touch block trading solution in U.S. credit to our broader client base as we speak. This is really exciting because we are delivering a click-to-trade solution where the trade is against the dealer acts or an indication of interest and the trade goes direct to the dealer without information leakage. This strong performance was driven by our client sales outreach we have been doing for our targeted block solution. Next, in the portfolio trading channel, which is a very important part of the market, we generated record levels of portfolio trading ADD with strong increases in both US high-grade and US high-yield estimated market share in Q1. U.S. high-grade portfolio trading market share was 19% in the quarter, up 520 basis points over the prior year. U.S. high-yield market share was 18%, up 690 basis points versus the prior year. Year-to-date through April, U.S. high-grade portfolio trading estimated market share is running up 310 basis points compared to full-year 2024 levels. And U.S. high yield is running up 260 basis points. So again, very strong progress with the portfolio trading channel. Last, in the dealer-initiated channel, we are beginning to see progress as we prepare to launch a new Midex solution later this quarter in U.S. credit. Dealer RFQ ADD was a record $1.8 billion, with record ADD across U.S. high-grade, emerging markets, and municipal bonds in Q1. U.S. high-grade dealer-initiated estimated market share increased almost 100 basis points year-over-year. We are very excited about the launch of our new Midex solution in the second quarter. It is a very streamlined, API-delivered, high-performance matching solution for dealers. Slide 7 highlights our strong growth in April, continuing the trend of March on a significant increase in credit market volatility. With the recent increase in volatility, we have seen spreads widen, liquidity needs increase, and the velocity of trading increase. We saw trading ADV grow 68% year-over-year to a record $57 billion, driven by strong growth across all products, including 32% growth in total credit ADV to a record $18 billion and 93% growth in total rates ADV to a record $39 billion. Most importantly, US high grade market share of 19.4% was 120 basis points higher than the prior year. We also saw a significant increase in the ETF market making activity in US high yield in April, the highest level since November 2023. Before I turn the call over to Eileen, let me make a couple of observations about the market, the recent volatility, and how our platform is responding. First, The velocity of trading in U.S. high-grade has risen to levels we have not seen since 2011, which is great for our market and further electronification. Portfolio trading, a key protocol that has fostered increased velocity, has continued to perform at high levels despite the increase in volatility. Portfolio trading was approximately 11% of the U.S. high-grade market in April, in line with prior periods, reflecting its resiliency as a risk transfer tool. Last, one of the most exciting aspects of this increase in volatility has been how our clients are increasingly willing to execute greater size through automation during times of volatility. Our largest and most sophisticated clients continue to increase their automation risk tolerance in March and April, with over 2,500 automation trades of 2 million or above over the two months, the highest two-month period ever. Also, we generated record US high-grade block count leveraging AutoX during the March and April period. We believe that our strong results were driven by the progress we have made with our new initiatives, as well as the significant increase in market volatility. Now, let me turn the call over to Eileen to review our financial performance.