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 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
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
 
3Q2012 14,405 36,246 3,435 54,086 865
3Q2013 15,522 8% 42,597 18% 4,586 34% 62,705 16% 987
 
 
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%
 
3Q2012 169,745 24,020 15,364,650
3Q2013 153,153 -10% 29,666 24% 22,989,713 50%
 
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%
 
3Q2012 ** 110,549 3,007 2,347,903
3Q2013 ** 93,254 -16% 4,263 42% 3,169,320 35%
 
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%
 
3Q2012 59,196 21,013 13,016,747
3Q2013 59,899 1% 25,403 21% 19,820,393 52%
* 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%
 
3Q2012 37,174 20,686 12,594,066
3Q2013 42,668 15% 25,017 21% 18,820,414 49%
 
* Includes options on futures
 
BROKERAGE STATISTICS
(in 000's, except % and where noted)
 

3Q2013
 

3Q2012
 

% Change
Total Accounts 231 205 13%
Customer Equity (in billions) * $41.4 $31.5 31%
 
Cleared DARTs 426 369 15%
Total Customer DARTs 471 390 21%
 
 
 
Cleared Customers (in $'s, except DART per account)
Commission per DART $4.32 $4.23 2%
DART per Avg. Account (Annualized) 469 456 3%
Net Revenue per Avg. Account (Annualized) $3,291 $3,216 2%

* 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   Nine Months
Ended September 30, Ended September 30,
2013   2012 2013   2012

(in millions)
 
Electronic Brokerage Net revenues $194.7 $167.6 $602.5 $498.3
Non-interest expenses 86.3 86.8 259.8 243.9
 
Income (loss) before income taxes $108.4 $80.8 $342.7 $254.4
 
Pre-tax profit margin 56% 48% 57% 51%
 
Market Making Net revenues $130.9 $154.1 $221.9 $387.8
Non-interest expenses 43.4 63.9 155.8 207.6
 
Income (loss) before income taxes $87.5 $90.2 $66.1 $180.2
 
Pre-tax profit margin 67% 59% 30% 46%
 
Corporate* Net revenues $0.7 ($3.1) $1.9 ($2.7)
Non-interest expenses 0.2 (4.7) (1.8) 1.1
 
Income (loss) before income taxes $0.5 $1.6 $3.7 ($3.8)
 
 
Total Net revenues $326.3 $318.6 $826.3 $883.4
Non-interest expenses 129.9 146.0 413.8 452.6
 
Income (loss) before income taxes $196.4 $172.6 $412.5 $430.8
 
Pre-tax profit margin 60% 54% 50% 49%
 
* 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   Nine Months
Ended September 30, Ended September 30,
2013   2012 2013   2012
(in millions, except share and per share data)
 
Revenues:
Trading gains $123.3 $149.7 $201.4 $372.0
Commissions and execution fees 120.4 100.5 378.0 309.5
Interest income 74.0 65.4 220.6 200.6
Other income 20.8 17.2 65.0 50.8
 
Total revenues 338.5 332.8 865.0 932.9
 
Interest expense 12.2 14.2 38.7 49.5
 
Total net revenues 326.3 318.6 826.3 883.4
 
Non-interest expenses:
Execution and clearing 56.0 61.7 180.3 192.5
Employee compensation and benefits 44.3 57.7 148.6 180.2
Occupancy, depreciation and amortization 9.3 9.0 28.6 28.9
Communications 6.2 6.0 17.4 17.2
General and administrative 14.1 11.6 38.9 33.8
 
Total non-interest expenses 129.9 146.0 413.8 452.6
 
Income before income taxes 196.4 172.6 412.5 430.8
 
Income tax expense 10.4 14.7 31.2 34.4
 
Net income 186.0 157.9 381.3 396.4
 
Net income attributable to noncontrolling interests 169.5 145.4 347.9 364.8
 
Net income (loss) attributable to common stockholders $16.5 $12.5 $33.4 $31.6
 
 
Earnings (loss) per share :*
Basic $0.33 $0.26 $0.68 $0.70
Diluted $0.32 $0.26 $0.67 $0.70
 
Weighted average common shares outstanding:
Basic 49,966,050 47,488,459 48,807,321 46,588,213
Diluted 50,988,214 47,679,818 49,981,664 46,865,770
 
Comprehensive income:
Net income (loss) attributable to common stockholders $16.5 $12.5 $33.4 $31.6
Other comprehensive income:
Cumulative translation adjustment, before income taxes 3.7 3.0 (4.0) 1.3
Income taxes related to items of other comprehensive income 0.1 1.1 (0.3) 0.5
Other comprehensive income (loss), net of tax 3.6 1.9 (3.7) 0.8
Comprehensive income (loss) attributable to common stockholders $20.1 $14.4 $29.7 $32.4
 
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests 169.5 $145.4 $347.9 $364.8
Other comprehensive income (loss) - cumulative translation adjustment 26.0 22.0 (29.6) 9.9
Comprehensive income attributable to noncontrolling interests $195.5 $167.4 $318.3 $374.7

* EPS is based on Net income (loss) available for common stockholders, please see table below. "Earnings per Share on Comprehensive Income" table.
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

EARNINGS PER SHARE ON COMPREHENSIVE INCOME

(UNAUDITED)
 
  Three Months   Nine Months
Ended September 30, Ended September 30,
2013   2012 2013   2012
(in millions, except share and per share data)
 
 
Net income (loss) attributable to common stockholders $16.5 $12.5 $33.4 $31.6
Add (deduct) net income attributable to non-fair value redemption rights 0.0 0.0 0.0 1.1
 
Net income (loss) available for common stockholders $16.5 $12.5 $33.4 $32.7
 
Other comprehensive income:
Cumulative translation adjustment, before income taxes 3.7 3.0 (4.0) 1.3
Income taxes related to items of other comprehensive income 0.1 1.1 (0.3) 0.5
Other comprehensive income (loss), net of tax 3.6 1.9 (3.7) 0.8
 
Comprehensive income (loss) available for common stockholders $20.1 $14.4 $29.7 $33.5
 
 
Comprehensive income (loss) per share:
Basic $0.40 $0.30 $0.61 $0.72
Diluted $0.39 $0.30 $0.59 $0.71
 
 
Weighted average common shares outstanding:
Basic 49,966,050 47,488,459 48,807,321 46,588,213
Diluted 50,988,214 47,679,818 49,981,664 46,865,770
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)
 
 

September 30,
 

December 31,

2013

2012
(in millions)
 
Assets
Cash and cash equivalents $1,548.5 $1,614.6

Cash and securities - segregated for regulatory purposes
12,681.1 12,482.4
Securities purchased under agreements to resell 487.8 428.9
Securities borrowed 3,363.2 2,833.1
Trading assets, at fair value 4,425.3 4,544.7
Receivables from customers, net of allowance 12,727.6 9,851.0
Receivables from brokers, dealers and clearing organizations 490.9 844.6
Other assets 552.6 600.3
 
Total assets $36,277.0 $33,199.6
 
Liabilities and equity
 
Liabilities
Trading liabilities - financial instruments sold but not yet purchased, at fair value $3,593.3 $4,286.3
Securities loaned 2,193.0 1,839.3
Short-term borrowings 2.6 110.4
Other payables:
Customers 24,809.3 21,422.0
Brokers, dealers and clearing organizations 234.8 361.8
Other payables 371.1 366.7
25,415.2 22,150.5
 
Senior notes payable and senior secured credit facility 0.0 0.0
 
Equity
Stockholders' equity 642.6 598.5
Noncontrolling interests 4,430.3 4,214.6
Total equity 5,072.9 4,813.1
 
Total liabilities and equity $36,277.0 $33,199.6

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