Interactive Brokers Group Announces 3Q2013 Results

Interactive Brokers Group Announces 3Q2013 Results

Reports Comprehensive Earnings Per Share of $0.39, Income Before Taxes of $196 Million on $326 Million in Net Revenues and Earnings Per Share on Net Income of $0.32

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 $0.39 for the quarter ended September 30, 2013, compared to diluted earnings per share on a comprehensive basis of $0.30 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 $0.32 for the quarter ended September 30, 2013, compared to diluted earnings per share of $0.26 for the same period in 2012.

Net revenues were $326 million and income before income taxes was $196 million for this quarter, compared to net revenues of $319 million and income before income taxes of $173 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 December 13, 2013 to shareholders of record as of November 29, 2013.

Business Highlights

  • 60% pretax profit margin for this quarter.
  • 56% Electronic Brokerage pretax profit margin for this quarter.
  • Customer equity grew 31% from the year-ago quarter to $41.4 billion and customer debits increased by 38%, to $12.7 billion.
  • Customer accounts grew 13% from the year-ago quarter to 231 thousand.
  • Total DARTs increased 21% from the year-ago quarter to 471 thousand.
  • Brokerage segment equity surpassed $2.4 billion. Total equity was $5.1 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes increased 34%, to $108 million, in the quarter ended September 30, 2013 compared to the same period last year. Commissions and execution fees increased 20% from the year-ago quarter, reflecting growth in customer accounts and higher average trading activity per customer. Net interest income grew 19% from the year-ago quarter, to $56 million in this quarter. Pretax profit margin was 56% for this quarter, up from 48% in the same period last year.

Total DARTs(1) for cleared and execution-only customers increased 21% to 471,000 from the year-ago quarter. Cleared DARTs were 426,000 in this quarter, 15% higher than the same period last year. Customer accounts grew 13% to 231,000 from the year-ago quarter. Customer equity increased 31%, to $41.4 billion, from the year-ago quarter(2). Customer margin borrowings were $3.5 billion higher than at the same time last year, ending the quarter at $12.7 billion.

Market Making

Market Making segment income before income taxes decreased to $88 million, for the quarter ended September 30, 2013 from $90 million for the same period in 2012. Removing the effects of currency translation, the Market Making segment produced $41 million pretax income in this quarter, compared to $49 million for the same period last year. Decrease in profit was driven by a continued lackluster market making environment marked by low volatility and decreasing actual to implied volatility. The average CBOE Volatility Index, or VIX, edged down during this quarter.

Currency translation gain was $46 million in this quarter, compared to a $42 million gain 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 diversification program increased our comprehensive earnings by $76 million, as the U.S. dollar value of the GLOBAL increased by approximately 1.5%. The effects of currency diversification are reported as components of (1) Market Making Trading Gains and (2) Other Comprehensive Income ("OCI"). In this quarter 61% 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, October 15, 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 BrokerageNonAvg. Trades
Making%Cleared%Cleared%Total%per U.S.

Period

Trades

Change

Trades

Change

Trades

Change

Trades

Change

Trading Day

200993,550127,33813,636234,524934
201075,169-20%133,6585%18,73237%227,559-3%905
201163,602-15%160,56720%19,1872%243,3567%968
201260,421-5%150,000-7%16,118-16%226,540-7%904
 
3Q201214,40536,2463,43554,086865
3Q201315,5228%42,59718%4,58634%62,70516%987
 
 
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
 
TOTALOptions%Futures*%Stocks%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2009643,38082,34575,449,891
2010678,8566%96,19317%84,469,87412%
2011789,37016%106,64011%77,730,974-8%
2012698,140-12%98,801-7%65,872,960-15%
 
3Q2012169,74524,02015,364,650
3Q2013153,153-10%29,66624%22,989,71350%
 
MARKET MAKINGOptions%Futures*%Stocks%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2009 **428,81015,12226,205,229
2010 **435,1841%15,3712%19,165,000-27%
2011 **503,05316%15,5191%11,788,769-38%
2012 **457,384-9%12,660-18%9,339,465-21%
 
3Q2012 **110,5493,0072,347,903
3Q2013 **93,254-16%4,26342%3,169,32035%
 
BROKERAGE TOTALOptions%Futures*%Stocks%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2009214,57067,22349,244,662
2010243,67214%80,82220%65,304,87433%
2011286,31718%91,12113%65,942,2051%
2012240,756-16%86,141-5%56,533,495-14%
 
3Q201259,19621,01313,016,747
3Q201359,8991%25,40321%19,820,39352%
* 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

200993,86866,24146,627,344
2010103,05410%79,14419%62,077,74133%
2011145,99342%89,61013%63,098,0722%
2012144,539-1%84,794-5%54,371,351-14%
 
3Q201237,17420,68612,594,066
3Q201342,66815%25,01721%18,820,41449%
 
* Includes options on futures
 
BROKERAGE STATISTICS
(in 000's, except % and where noted)
 

3Q2013

 

3Q2012

 

% Change

Total Accounts23120513%
Customer Equity (in billions) *$41.4$31.531%
 
Cleared DARTs42636915%
Total Customer DARTs47139021%
 
 
 
Cleared Customers (in $'s, except DART per account)
Commission per DART$4.32$4.232%
DART per Avg. Account (Annualized)4694563%
Net Revenue per Avg. Account (Annualized)$3,291$3,2162%

* 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.

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED)

 
  Three Months Nine Months
Ended September 30,Ended September 30,
2013 20122013 2012

(in millions)

 
Electronic BrokerageNet revenues$194.7$167.6$602.5$498.3
Non-interest expenses86.386.8259.8243.9
 
Income (loss) before income taxes$108.4$80.8$342.7$254.4