Interactive Brokers Group Announces 2Q2013 Results

Interactive Brokers Group Announces 2Q2013 Results

Reports Comprehensive Earnings Per Share of $0.14, Income before Taxes of $134 Million on $284 Million in Net Revenues and Earnings Per Share on Net Income of $0.21;

Declares Quarterly Dividend of $0.10 Per Share


GREENWICH, Conn.--(BUSINESS WIRE)-- Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share on a comprehensive basis of $0.14 for the quarter ended June 30, 2013, compared to diluted earnings per share on a comprehensive basis of $0.09 for the same period in 2012.

On a non-comprehensive basis, which excludes the effect of changes in the U.S. dollar value of the Company's non-U.S. subsidiaries, the Company reported diluted earnings per share on net income of $0.21 for the quarter ended June 30, 2013, compared to diluted earnings per share of $0.17 for the same period in 2012.

Net revenues were $284 million and income before income taxes was $134 million for this quarter, compared to net revenues of $261 million and income before income taxes of $109 million for the same period in 2012.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on September 13, 2013 to shareholders of record as of August 30, 2013.

Business Highlights

  • 47% pretax profit margin for this quarter.

  • 58% Electronic Brokerage pretax profit margin for this quarter.

  • Customer equity grew 31% from the year-ago quarter to $37.4 billion and customer debits increased by 32%, to $11.2 billion.

  • Customer accounts grew 12% from the year-ago quarter to 224 thousand.

  • Cleared DARTs increased 16% from the year-ago quarter to 463 thousand.

  • Brokerage segment equity surpassed $2.3 billion. Total equity was $4.9 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes increased 37%, to $123 million, in the quarter ended June 30, 2013 compared to the same period last year. Commissions and execution fees increased 28% from the year-ago quarter, reflecting growth in customer accounts and higher average trading activity per customer. Net interest income grew 27% from the year-ago quarter, to $58 million in this quarter. Pretax profit margin was 58% for this quarter, up from 53% in the same period last year.

Total DARTs(1) for cleared and execution-only customers increased 19% to 506,000 from the year-ago quarter. Cleared DARTs were 463,000 in this quarter, 16% higher than the same period last year. Customer accounts grew 12% to 224,000 from the year-ago quarter. Customer equity increased 31%, to $37.4 billion, from the year-ago quarter(2). Customer margin borrowings were $2.7 billion higher than at the same time last year, ending the quarter at $11.2 billion.

Market Making

Market Making segment income before income taxes decreased to $8 million, for the quarter ended June 30, 2013 from $24 million for the same period in 2012. Removing the effects of currency translation, the Market Making segment produced $51 million pretax income in this quarter, compared to $65 million for the same period last year. Decrease in profit was driven by a continued lackluster market making environment with a majority of the quarter marked by low volatility, one-directional market movement, and tight bid/offer spreads. The average CBOE Volatility Index, or VIX, edged up during this quarter from its lowest level in recent history, in the first quarter of 2013.

Currency translation loss was $43 million in this quarter, compared to a $41 million loss in the year-ago quarter.

Effects of Foreign Currency Diversification

In connection with our currency strategy, we have determined to base our net worth in GLOBALs, a basket of 16 major currencies in which we hold our equity. In this quarter, our currency hedging program decreased our comprehensive earnings by $75 million, as the U.S. dollar value of the GLOBAL decreased by approximately 1.5%. The effects of currency hedging are reported as components of (1) Market Making Trading Gains and (2) Other Comprehensive Income ("OCI"). In this quarter 57% of the GLOBAL effect was captured in Market Making Trading Gains in the Net Income section of the Statement of Comprehensive Income, with the remainder reported as OCI in the separate Comprehensive Income section of the Statement of Comprehensive Income.

(1) Daily average revenue trades (DARTs) are based on customer orders.

(2) Approximately 10% of the increase in customer equity was due to the reclassification of certain related accounts from "non-customer" to "customer", which are regulatory distinctions.

_____________________

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, July 16, 2013, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the "Interactive Brokers Conference Call."

The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.

About Interactive Brokers Group, Inc.:

Interactive Brokers Group, Inc., together with its subsidiaries, is an automated global electronic broker that specializes in catering to financial professionals by offering state-of-the-art trading technology, superior execution capabilities, worldwide electronic access, and sophisticated risk management tools at exceptionally low costs. The brokerage trading platform utilizes the same innovative technology as the Company's market making business, which specializes in routing orders and executing and processing trades in securities, futures, foreign exchange instruments, bonds and funds on more than 100 electronic exchanges and trading venues around the world. As a market maker, we provide liquidity at these marketplaces and, as a broker, we provide professional traders and investors with electronic access to stocks, options, futures, forex, bonds and mutual funds from a single IB Universal AccountSM. Employing proprietary software on a global communications network, Interactive Brokers is continuously integrating its software with a growing number of exchanges and trading venues into one automatically functioning, computerized platform that requires minimal human intervention.

Cautionary Note Regarding Forward-Looking Statements:

The foregoing information contains certain forward-looking statements that reflect the company's current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the company's operations and business environment which may cause the company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the company on the date of this release. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the company's financial results may be found in the company's filings with the Securities and Exchange Commission.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

TRADE VOLUMES:

(in 000's, except %)

Brokerage

Market

Brokerage

Non

Avg. Trades

Making

%

Cleared

%

Cleared

%

Total

%

per U.S.

Period

Trades

Change

Trades

Change

Trades

Change

Trades

Change

Trading Day

2009

93,550

127,338

13,636

234,524

934

2010

75,169

-20%

133,658

5%

18,732

37%

227,559

-3%

905

2011

63,602

-15%

160,567

20%

19,187

2%

243,356

7%

968

2012

60,421

-5%

150,000

-7%

16,118

-16%

226,540

-7%

904

2Q2012

16,495

38,934

4,326

59,755

948

2Q2013

18,794

14%

46,509

19%

4,968

15%

70,271

18%

1,098

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

Options

%

Futures*

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2009

643,380

82,345

75,449,891

2010

678,856

6%

96,193

17%

84,469,874

12%

2011

789,370

16%

106,640

11%

77,730,974

-8%

2012

698,140

-12%

98,801

-7%

65,872,960

-15%

2Q2012

188,561

27,501

15,367,826

2Q2013

184,215

-2%

34,824

27%

23,792,808

55%

MARKET MAKING

Options

%

Futures*

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2009 **

428,810

15,122

26,205,229

2010 **

435,184

1%

15,371

2%

19,165,000

-27%

2011 **

503,053

16%

15,519

1%

11,788,769

-38%

2012 **

457,384

-9%

12,660

-18%

9,339,465

-21%

2Q2012 **

125,694

3,622

2,491,670

2Q2013 **

116,898

-7%

5,325

47%

3,912,368

57%

BROKERAGE TOTAL

Options

%

Futures*

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2009

214,570

67,223

49,244,662

2010

243,672

14%

80,822

20%

65,304,874

33%

2011

286,317

18%

91,121

13%

65,942,205

1%

2012

240,756

-16%

86,141

-5%

56,533,495

-14%

2Q2012

62,867

23,879

12,876,156

2Q2013

67,317

7%

29,499

24%

19,880,440

54%

* Includes options on futures

** In Brazil, an equity option contract typically represents 1 share of the underlying stock; however, the typical minimum trading quantity is 100 contracts. To make a fair comparison to volume at other exchanges, we have adopted a policy of reporting Brazilian equity options contracts divided by their trading quantity of 100.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

BROKERAGE CLEARED

Options

%

Futures*

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2009

93,868

66,241

46,627,344

2010

103,054

10%

79,144

19%

62,077,741

33%

2011

145,993

42%

89,610

13%

63,098,072

2%

2012

144,539

-1%

84,794

-5%

54,371,351

-14%

2Q2012

37,385

23,510

12,312,747

2Q2013

46,962

26%

28,938

23%

18,932,615

54%

* Includes options on futures

BROKERAGE STATISTICS

(in 000's, except % and where noted)

2Q2013

2Q2012

% Change

Total Accounts

224

200

12%

Customer Equity (in billions) *

$37.4

$28.6

31%

Cleared DARTs

463

399

16%

Total Customer DARTs

506

427

19%

Cleared Customers (in $'s, except DART per account)

Commission per DART

$4.50

$4.18

8%

DART per Avg. Account (Annualized)

526

507

4%

Net Revenue per Avg. Account (Annualized)

$3,659

$3,356

9%

*

Excludes non-customers. Approximately 10% of the increase in customer equity was due to the reclassification of certain related accounts from "non-customer" to "customer", which are regulatory distinctions.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED)

Three Months

Six Months

Ended June 30,

Ended June 30,

2013

2012

2013

2012

(in millions)

Electronic Brokerage

Net revenues

$212.5

$171.4

$407.8

$330.7

Non-interest expenses

89.2

81.2

173.5