Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share of $0.22 for the quarter ended June 30, 2011, compared to diluted earnings per share of $0.09 for the same period in 2010.

On a comprehensive basis, which includes the full effect of currency translation, the Company reported diluted earnings per share of $0.31 for the quarter ended June 30, 2011 compared to diluted earnings per share of $0.004 for the same period in 2010. Reported results on a comprehensive basis reflect the new GAAP convention that requires the reporting of currency translation results contained in Other Comprehensive Income as part of reportable earnings. Previously, these were reported as a component of changes in Total Equity in the Statement of Financial Condition.

Net revenues were $297 million and income before income taxes was $149 million for this quarter, compared to net revenues of $226 million and income before income taxes of $72 million for the same period in 2010.

Business Highlights
  • 50% pretax profit margin for this quarter.
  • 52% Electronic Brokerage pretax margin for this quarter.
  • 47% Market Making pretax profit margin for this quarter.
  • Customer equity increased 57% from the year-ago quarter to $25.7 billion and customer accounts increased 21%.
  • Cleared DARTs decreased 2% from the year-ago quarter to 378,000.
  • Electronic Brokerage pretax income increased 23% from the year-ago quarter.
  • Market Making pretax income increased to $59 million from $4 million in the year-ago quarter.

"This quarter we have realized our goal of becoming the largest electronic broker as measured by DARTs," said Thomas Peterffy, our CEO. “We are looking forward to solidifying this position and continuing to reveal new and innovative services in the coming months."

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes grew 23% in the quarter ended June 30, 2011 compared to the same period in 2010. Commissions and execution fees were level with those of the year-ago quarter. Net interest income increased 109% from the same period. Customer accounts grew 21% to 176,000 and customer equity grew 57% to $25.7 billion. Pretax profit margin increased from 50% to 52% for the quarter ended June 30, 2011 from the same period in 2010. Total DARTs (1) for cleared and execution-only customers decreased 3%, to 408,000 from the year-ago quarter. Cleared DARTs were 378,000 in this quarter, 2% lower than the same period last year.

Market Making

Market Making segment income before income taxes increased from $4 to $59 million for the quarter ended June 30, 2011 from the same period in 2010. This increase is partly a reflection of currency translation effects, which negatively impacted the year-ago quarter’s earnings, and are reported in the results of the Market Making segment. Pretax profit margin expanded to 47% in this quarter from 5% in the quarter ended June 30, 2010. The environment for market makers exhibited wider options bid/offer spreads in the U.S., declining trading volume and lower actual-to-implied volatility ratios. Market Making options contract and futures volume decreased by 20% and 19%, respectively, from the year-ago quarter.

Effects of Foreign Currency Diversification

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. In this quarter, our currency hedging program contributed to our profits as the U.S. dollar value of the GLOBAL increased by approximately 1.2%. The effects of currency hedging are reported as components of (1) Market Making Trading Gains and (2) Other Comprehensive Income, described below.

Comprehensive Income

Reported results on a comprehensive basis reflect the Company’s early adoption of newly issued U.S. GAAP guidance (2) that requires the presentation of a Statement of Comprehensive Income, replacing the former Statement of Income. The Statement of Comprehensive Income reports currency translation results that are a component of Other Comprehensive Income (“OCI”) directly in this statement. Previously, OCI was reported as a component of changes in total equity in the Statement of Financial Condition. In prior periods we reported non-GAAP measures for the purpose of incorporating all currency translation gains and losses in the Statement of Income. This reporting method is now required under GAAP guidance.
(1)   Daily average revenue trades (DARTs) are based on customer orders.
(2) Accounting Standards Update 2011-05, Comprehensive Income.

_____________________

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, July 21, 2011, at 4:30 p.m. ET to discuss its second 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 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 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
 
2Q2010 20,358 37,404 4,777 62,539 993
2Q2011 14,419 -29% 37,112 -1% 4,024 -16% 55,555 -11% 882
 
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%
 
2Q2010 191,064 27,362 22,790,303
2Q2011 162,737 -15% 24,013 -12% 19,091,293 -16%
 
 
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%
 
2Q2010 ** 122,364 4,411 5,469,349
2Q2011 ** 98,168 -20% 3,585 -19% 2,546,066 -53%
 
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%
 
2Q2010 68,700 22,951 17,320,954
2Q2011 64,569 -6% 20,428 -11% 16,545,227 -4%
* 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
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%
 
2Q2010 29,491 22,463 16,487,944
2Q2011 35,277 20% 20,090 -11% 15,972,585 -3%
 
* Includes options on futures
 
 
BROKERAGE STATISTICS
(in 000's, except % and where noted)
       

2Q2011
   

2Q2010
   

% Change
Total Accounts 176 146 21%
Customer Equity (in billions) * $25.7 $16.4 57%
 
Cleared DARTs 378 385 -2%
Total Customer DARTs 408 422 -3%
 
 
(in $'s, except DART per account)
Commission per DART $4.33 $4.24 2%
DART per Avg. Account (Annualized) 554 677 -18%
Net Revenue per Avg. Account (Annualized) $3,809 $3,801 0%
 
* Excludes non-customers
 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
                     
 
Three Months Six Months
Ended June 30, Ended June 30,
2011 2010 2011 2010

(in millions)
 
Market Making Net revenues $125.8 $81.7 $328.1 $164.5
Non-interest expenses 66.5   77.8   134.2   155.1  
 
Income before income taxes $59.3   $3.9   $193.9   $9.4  
 
Pre-tax profit margin 47 % 5 % 59 % 6 %
 
Electronic Brokerage Net revenues $169.7 $144.6 $333.4 $271.8
Non-interest expenses 80.7   72.3   154.3   135.1  
 
Income before income taxes $89.0   $72.3   $179.1   $136.7  
 
Pre-tax profit margin 52 % 50 % 54 % 50 %
 
Corporate* Net revenues $1.4 ($0.2 ) $3.3 $0.4
Non-interest expenses 0.6   3.9   5.2   9.5  
 
Income before income taxes $0.8   ($4.1 ) ($1.9 ) ($9.1 )
 
 
Total Net revenues $296.9 $226.1 $664.8 $436.7
Non-interest expenses 147.8   154.0   293.7   299.7  
 
Income before income taxes $149.1   $72.1   $371.1   $137.0  
 
Pre-tax profit margin 50 % 32 % 56 % 31 %
 
 
* Corporate includes corporate related activities as well as inter-segment eliminations.
 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
                 
Three Months Six Months
Ended June 30, Ended June 30,
2011       2010 2011       2010
(in millions, except share and per share data)
 
Revenues:
Trading gains $120.6 $77.6 $320.9 $158.2
Commissions and execution fees 106.5 107.6 215.7 199.3
Interest income 79.3 41.0 138.0 77.6
Other income 15.0 17.7   32.4 34.5  
 
Total revenues 321.4 243.9 707.0 469.6
 
Interest expense 24.5 17.8   42.2 32.9  
 
Total net revenues 296.9 226.1   664.8 436.7  
 
Non-interest expenses:
Execution and clearing 66.1 75.5 132.3 145.2
Employee compensation and benefits 52.6 49.5 105.0 100.0
Occupancy, depreciation and amortization 9.1 9.2 18.3 18.4
Communications 6.6 6.3 12.1 11.7
General and administrative 13.4 13.5   26.0 24.4  
 
Total non-interest expenses 147.8 154.0   293.7 299.7  
 
Income before income taxes 149.1 72.1 371.1 137.0
 
Income tax expense 12.5 7.4   31.2 12.6  
 
Net income 136.6 64.7 339.9 124.4
 
Net income attributable to non-controlling interests 127.1 60.9   314.1 116.7  
 
Net income available for common shareholders $9.5 $3.8   $25.8 $7.7  
 
 
Earnings per share
Basic $0.22 $0.09   $0.61 $0.18  
Diluted $0.22 $0.09   $0.60 $0.18  
 
Weighted average common shares outstanding
Basic 43,018,095 41,802,541 42,627,045 41,511,328
Diluted 43,470,928 42,441,995 43,133,155 42,206,384
 
Comprehensive income:
Net income available for common stockholders $9.5 $3.8 $25.8 $7.7
Other comprehensive income:
Cumulative translation adjustment, before income taxes 6.1 (5.8 ) 8.1 (8.0 )
Income taxes related to items of other comprehensive income 2.2 (2.2 ) 3.0 (3.0 )
Other comprehensive income, net of tax 3.9 (3.6 ) 5.1 (5.0 )
Comprehensive income available for common stockholders $13.4 $0.2   $30.9 $2.7  
 
Comprehensive income attributable to non-controlling interests:
Net income attributable to non-controlling interests $127.1 $60.9 $314.1 $116.7
Other comprehensive income (loss) - cumulative translation adjustment 50.1 (49.4 ) 66.7 (68.1 )
Comprehensive income attributable to non-controlling interests $177.2 $11.5   $380.8 $48.6  
 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
             
June 30, December 31,
2011 2010
(in millions)
Assets
Cash and cash equivalents $1,422.9 $1,354.2
Cash and securities - segregated for regulatory purposes 8,807.9 7,888.1
Securities purchased under agreements to resell 304.3 336.3
Securities borrowed 3,215.6 3,292.3
Trading assets, at fair value 6,103.5 7,422.4
Receivables from customers, net of allowance 9,320.0 6,973.0
Receivables from brokers, dealers and clearing organizations 947.4 732.9
Other assets 518.7 499.6
 
Total assets $30,640.3 $28,498.8
 
Liabilities and equity
 
Liabilities
Trading liabilities - financial instruments sold but not yet purchased, at fair value $4,940.0 $6,125.2
Securities loaned 1,757.5 1,659.6
Short-term borrowings 43.0 187.4
Other payables:
Customers 18,158.9 15,060.5
Brokers, dealers and clearing organizations 283.4 248.7
Other payables 693.7 702.3
19,136.0 16,011.5
 
Senior notes payable and senior secured credit facility 178.3 294.6
 
Equity
Stockholders' equity 530.6 487.8
Non-controlling interests 4,054.9 3,732.7
Total equity 4,585.5 4,220.5
 
Total liabilities and equity $30,640.3 $28,498.8
 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)
          Three months ended       Six Months
Ended June 30, Ended June 30,
2011   2010 2011   2010
 
Net income available for common stockholders $9.5 $3.8 $25.8 $7.7
 
Other comprehensive income:
Cumulative translation adjustment, before income taxes 6.1 (5.8) 8.1 (8.0)
Income taxes related to items of other comprehensive income 2.2 (2.2) 3.0 (3.0)
Other comprehensive income, net of tax 3.9 (3.6) 5.1 (5.0)
 
Comprehensive income available for common stockholders $13.4 $0.2 $30.9 $2.7
 
 
Comprehensive income per share:
Basic

$0.311

$0.004

$0.725

$0.064
Diluted

$0.308

$0.004

$0.717

$0.063
 
 
Weighted average common shares outstanding:
Basic 43,018,095 41,802,541 42,627,045 41,511,328
Diluted 43,470,928 42,441,995 43,133,155 42,206,384

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