Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic market maker and broker, today reported diluted earnings per share of $0.38 for the quarter ended March 31, 2011, compared to diluted earnings per share of $0.09 for the same period in 2010. Reported results reflect the GAAP convention that shifts currency hedging results from reportable earnings to Other Comprehensive Income, which is reported in the Statement of Financial Condition. The Company considers this item to be material to the operating results. Including the effects of currency translation, the Company estimates, on a non-GAAP basis, diluted earnings per share of $0.41 for the quarter ended March 31, 2011 ($0.06 for the same period in 2010).

Net revenues were $368 million and income before income taxes was $222 million for this quarter, compared to net revenues of $211 million and income before income taxes of $65 million for the same period in 2010. Adjusted for the currency reporting convention described above, on a non-GAAP basis, first quarter 2011 net revenues were $387 million ($190 million for the same period in 2010) and first quarter 2011 income before income taxes was $241 million ($44 million for the same period in 2010).

The Interactive Brokers Group, Inc. Board of Directors today declared a quarterly cash dividend of $0.10 per share. This dividend is payable on June 14, 2011 to shareholders of record as of May 27, 2011.

Business Highlights
  • 60% pretax profit margin for this quarter (62% on a non-GAAP basis).
  • 67% Market Making pretax profit margin for this quarter (69% on a non-GAAP basis).
  • 55% Electronic Brokerage pretax margin for this quarter.
  • Customer equity increased 49% from the year-ago quarter to $24.8 billion and customer accounts increased 20%.
  • Cleared DARTs increased 18% from the year-ago quarter to 387,000.
  • Market Making pretax income increased from $6 million to $135 million from the year-ago quarter (increased from $16 million loss to $153 million income on a non-GAAP basis).

"The spectacular growth of our brokerage business has continued unabated in the first quarter of 2011, proving that when you offer more value at lower cost people do notice," said Thomas Peterffy, our CEO. “As analysts correctly estimated, the weak dollar contributed approximately $54 million, or 24%, of our pretax earnings on a GAAP basis. Today we are announcing our intention to pay a regular quarterly dividend of 10 cents per share."

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes grew 40% in the quarter ended March 31, 2011 compared to the same period in 2010. Commissions and execution fees grew by 19% and net interest income increased 89% from the same quarter last year. Customer accounts grew 20% to 168,000 and customer equity grew 49% to $24.8 billion. Pretax profit margin increased from 51% to 55% for the quarter ended March 31, 2011 from the same period in 2010. Total DARTs (1) for cleared and execution-only customers increased 16%, to 423,000 from the year-ago quarter. Cleared DARTs were 387,000 in this quarter, 18% higher than the same period last year.

Market Making

Market Making segment income before income taxes increased from $6 to $135 million (from -$16 to $153 million on a non-GAAP basis) for the quarter ended March 31, 2011 from the same period in 2010. Pretax profit margin expanded to 67% (69% on a non-GAAP basis) in this quarter from 7% (-25% on a non-GAAP basis) in the quarter ended March 31, 2010. The environment for market makers improved this quarter with wider spreads and higher actual to implied volatility ratios. Our currency hedging program contributed to our profits as the U.S. dollar value of the global basket of currencies in which we hold our equity increased by approximately 1.7% in this quarter. Market Making options contract volume decreased by 5% and futures volume increased by 12% from the year-ago quarter.

Effects of Non-GAAP Measures

Non-GAAP measures are used to isolate items that the Company’s management views as non-operating in nature or as material to operating results but not otherwise reported therein. Presentation of non-GAAP measures is intended to give a clearer presentation of operating results. Given the material impact on our reported financial results, the following non-GAAP measure is presented for the current period:

In connection with our currency hedging strategy, we have determined to base our net worth in GLOBALs, a basket of major currencies in which we hold our equity. Pursuant to GAAP convention, a portion of our currency translation gains and losses is reported as Other Comprehensive Income in the Statement of Financial Condition. This income is, in effect, shifted from the reported earnings to the Statement of Financial Condition. The purpose of this non-GAAP measure is to report all currency translation gains and losses as if they were included in the Statement of Income. This analysis contains certain assumptions about tax rates and should, therefore, be considered an estimate.

Management believes that it is appropriate to include this item in the Statement of Income in order to achieve a proper representation of the Company’s financial performance. Please see the tables at the end of this release for the reconciliation of our GAAP to Non-GAAP results.

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

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, April 21, 2011, at 11:00 a.m. ET to discuss its first quarter 2011 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 market maker and broker specializing in routing orders and executing and processing trades in securities, futures, foreign exchange instruments, bonds and funds on more than 90 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 Account SM. 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
2006 66,043 51,238 12,828 130,109 518
2007 99,086 50% 72,931 42% 16,638 30% 188,655 45% 752
2008 101,672 3% 120,195 65% 16,966 2% 238,833 27% 944
2009 93,550 -8% 127,338 6% 13,636 -20% 234,524 -2% 934
2010 75,169 -20% 133,658 5% 18,732 37% 227,559 -3% 905
 
1Q2010 19,613 30,967 4,760 55,340 907
1Q2011 14,488 -26% 38,023 23% 4,458 -6% 56,969 3% 919
               
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)    
     
TOTAL Options % Futures* % Stocks %

Period

(contracts)

Change

(contracts)

Change

(shares)

Change
2006 563,623 62,419 34,493,410
2007 673,144 19% 83,134 33% 47,324,798 37%
2008 757,732 13% 108,984 31% 55,845,428 18%
2009 643,380 -15% 82,345 -24% 75,449,891 35%
2010 678,856 6% 96,193 17% 84,469,874 12%
 
1Q2010 159,802 21,716 19,906,810
1Q2011 168,164 5% 24,138 11% 22,028,447 11%
                       
MARKET MAKING Options % Futures* % Stocks %

Period

(contracts)

Change

(contracts)

Change

(shares)

Change
2006 371,929 14,818 21,180,377
2007 447,905 20% 14,520 -2% 24,558,314 16%
2008 ** 514,629 15% 21,544 48% 26,008,433 6%
2009 ** 428,810 -17% 15,122 -30% 26,205,229 1%
2010 ** 435,184 1% 15,371 2% 19,165,000 -27%
 
1Q2010 ** 103,056 3,072 5,014,107
1Q2011 ** 97,595 -5% 3,428 12% 2,633,325 -47%
BROKERAGE TOTAL     Options     %     Futures*     %     Stocks     %

Period

(contracts)

Change

(contracts)

Change

(shares)

Change
2006 191,694 47,601 13,313,033
2007 225,239 17% 68,614 44% 22,766,484 71%
2008 243,103 8% 87,440 27% 29,836,995 31%
2009 214,570 -12% 67,223 -23% 49,244,662 65%
2010 243,672 14% 80,822 20% 65,304,874 33%
 
1Q2010 56,746 18,644 14,892,703
1Q2011 70,569 24% 20,710 11% 19,395,122 30%
* 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.

 
BROKERAGE CLEARED                    
Options % Futures* % Stocks %

Period

(contracts)

Change

(contracts)

Change

(shares)

Change
2006 32,384 45,351 12,492,870
2007 51,586 59% 66,278 46% 20,353,584 63%
2008 77,207 50% 85,599 29% 26,334,752 29%
2009 93,868 22% 66,241 -23% 46,627,344 77%
2010 103,054 10% 79,144 19% 62,077,741 33%
 
1Q2010 23,309 18,315 14,046,381
1Q2011 33,762 45% 20,332 11% 18,722,839 33%
 
* Includes options on futures
           
BROKERAGE STATISTICS
(in 000's, except % and where noted)

1Q2011

1Q2010

% Change
Total Accounts 168 140 20 %
Customer Equity (in billions) * $ 24.8 $ 16.7 49 %
 
Cleared DARTs 387 328 18 %
Total Customer DARTs 423 364 16 %
 

(in $'s, except DART per account)
Commission per DART $ 4.38 $ 4.40 0 %
DART per Avg. Account (Annualized) 597 604 -1 %
Net Revenue per Avg. Account (Annualized) $ 3,891 $ 3,583 9 %
 
* Excludes non-customers
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED)
 
          Three Months
Ended March 31,
  2011           2010  
(in millions)
 
Market Making Net revenues $ 202.3 $ 82.8
Non-interest expenses   67.7     77.3  
 
Income before income taxes

$

134.6
  $ 5.5  
 
Pre-tax profit margin 67 % 7 %
 
Electronic Brokerage Net revenues $ 163.7 $ 127.2
Non-interest expenses   73.6     62.8  
 
Income before income taxes $ 90.1   $ 64.4  
 
Pre-tax profit margin 55 % 51 %
 
Corporate* Net revenues $ 1.9 $ 0.6
Non-interest expenses   4.6     5.6  
 
Income before income taxes   ($2.7 )   ($5.0 )
 
Total Net revenues $ 367.9 $ 210.6
Non-interest expenses   145.9     145.7  
 
Income before income taxes $ 222.0   $ 64.9  
 
Pre-tax profit margin 60 % 31 %
 
 
* Corporate includes corporate related activities as well as inter-segment eliminations.
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)
 
          Three Months
Ended March 31,
  2011         2010
(in millions except share and per share data)
 
Revenues:
Trading gains $ 200.3 $ 80.6
Commissions and execution fees 109.2 91.7
Interest income 58.7 36.6
Other income   17.4   16.8
 

Total revenues
385.6 225.7
 
Interest expense   17.7   15.1
 
Total net revenues   367.9   210.6
 
Non-interest expenses:
Execution and clearing 66.2 69.7
Employee compensation and benefits 52.4 50.5
Occupancy, depreciation and amortization 9.2 9.2
Communications 5.5 5.4
General and administrative   12.6   10.9
 
Total non-interest expenses   145.9   145.7
 
Income before income taxes 222.0 64.9
 
Income tax expense   18.7   5.2
 
Net income 203.3 59.7
 

Net income attributable to non-controlling interests
  187.0   55.8
 
Net income available for common shareholders $ 16.3 $ 3.9
 
 
Earnings per share:
Basic $ 0.38 $ 0.09
Diluted $ 0.38 $ 0.09
 
Weighted average common shares outstanding:
Basic   42,231,651   41,216,879
Diluted   42,791,822   41,966,053
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
           
March 31, December 31,
2011 2010
(in millions)
Assets
Cash and cash equivalents $ 1,176.2 $ 1,354.2
Cash and securities - segregated for regulatory purposes 8,256.7 7,888.1
Securities purchased under agreements to resell 325.0 336.3
Securities borrowed 3,326.3 3,292.3
Trading assets, at fair value 6,419.0 7,422.4
Receivables from customers, net of allowance 9,285.1 6,973.0
Receivables from brokers, dealers and clearing organizations 739.7 732.9
Other assets   526.6   499.6
 
Total assets $ 30,054.6 $ 28,498.8
 
Liabilities and equity
 
Liabilities
Trading liabilities - financial instruments sold but not yet purchased, at fair value $ 5,333.9 $ 6,125.2
Securities loaned 1,518.3 1,659.6
Short-term borrowings 171.4 187.4
Other payables:
Customers 17,408.8 15,060.5
Brokers, dealers and clearing organizations 278.7 248.7
Other payables   701.8   702.3
  18,389.3   16,011.5
 
Senior notes payable and senior secured credit facility 200.9 294.6
 
Equity
Stockholders' equity 505.3 487.8
Non-controlling interests   3,935.5   3,732.7
Total equity   4,440.8   4,220.5
 
Total liabilities and equity $ 30,054.6 $ 28,498.8
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP PERFORMANCE MEASURES RECONCILIATION

(UNAUDITED)
             
1Q2011 1Q2010
                                                       
(In thousands, except shares or per share amounts)
As Reported       Non-GAAPAdjustments       Non-GAAPFinancialPerformanceMeasures As Reported       Non-GAAPAdjustments       Non-GAAPFinancialPerformanceMeasures
   

 
     
Net Revenues:
As reported $ 367,887 $ 210,570
Non-GAAP Adjustments for non-operating activities -
Other Comprehensive Income (a)   $ 18,622     $ (20,955)  
$ 367,887 $ 18,622 $ 386,509 $ 210,570 $ (20,955) $ 189,615
 
 
Income Before Income Taxes:
As reported $ 221,971 $ 64,913
Non-GAAP Adjustments for non-operating activities -
 
Other Comprehensive Income (a)   $ 18,622     $ (20,955)  
$ 221,971 $ 18,622 $ 240,593 $ 64,913 $ (20,955) $ 43,958
 
Pre-tax profit margin 60% 62% 31% 23%
 
 
Income Tax Expense
As reported $ 18,731 $ 5,226
Non-GAAP Adjustments for non-operating activities -
Other Comprehensive Income (a)   $ 4,606     $ (3,989)  
$ 18,731 $ 4,606 $ 23,337 $ 5,226 $ (3,989) $ 1,237
 
 
Net Income (loss) attributable to common stockholders
As reported $ 16,251 $ 3,891
Non-GAAP Adjustments for non-operating activities -
Other Comprehensive Income (a)   $ 1,303     $ (1,434)  
$ 16,251 $ 1,303 $ 17,554 $ 3,891 $ (1,434) $ 2,457
 
Earnings per Share:
Basic $ 0.38 $ 0.04 $ 0.42 $ 0.09 $ (0.03) $ 0.06
Diluted $ 0.38 $ 0.03 $ 0.41 $ 0.09 $ (0.03) $ 0.06
 
 
Weighted Average Shares:
Basic 42,231,651 42,231,651 41,216,879 41,216,879
Diluted 42,791,822 42,791,822 41,966,053 41,966,053

(a)
 

Reporting the effect of currency rate changes on the Company's financial statements directly through equity as a component of Other Comprehensive Income is a U.S. GAAP reporting convention. Management measures the Company's performance by including such currency effects in trading gains, a component of net revenues, and in income, net of the effective tax rates paid by foreign subsidiaries and net of U.S. Corporate Taxes on the Company's share of such income. The combined effective tax rate for foreign subsidiaries was 23.5% and 17.2% for the quarter ended March 31, 2011and 2010, respectively. The Company's effective U.S. Corporate Tax Rate was 36.8%.
 
                                                   

INTERACTIVE BROKERS GROUP, INC. MARKET MAKING SEGMENT

GAAP TO NON-GAAP PERFORMANCE MEASURES RECONCILIATION

(UNAUDITED)
 
1Q2011 1Q2010
 
(In thousands)
AsReported Non-GAAPAdjustments Non-GAAPFinancialPerformanceMeasures AsReported Non-GAAPAdjustments Non-GAAPFinancialPerformanceMeasures
 
Net Revenues:
As reported $ 202,338 $ 82,781
Non-GAAP Adjustments for non-operating activities -
Other Comprehensive Income (a)   $ 18,622     $ (20,955)  
$ 202,338 $ 18,622 $ 220,960 $ 82,781 $ (20,955) $ 61,826
 
 
Income Before Income Taxes:
As reported $ 134,666 $ 5,456
Non-GAAP Adjustments for non-operating activities -
 
Other Comprehensive Income (a)   $ 18,622     $ (20,955)  
$ 134,666 $ 18,622 $ 153,288 $ 5,456 $ (20,955) $ (15,499)
 
Pre-tax profit margin 67% 69% 7% -25%

(a)
  Reporting the effect of currency rate changes on the Company's financial statements directly through equity as a component of Other Comprehensive Income is a U.S. GAAP reporting convention. Management measures the Market Making segment's performance by including such currency effects in trading gains, a component of net revenues, and in income before taxes.

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