Interactive Brokers Group Announces 1Q2014 Results

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 $0.35 for the quarter ended March 31, 2014, compared to diluted earnings per share on a comprehensive basis of $0.06 for the same period in 2013.

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 $0.34 for the quarter ended March 31, 2014, compared to diluted earnings per share of $0.14 for the same period in 2013.

Net revenues were $355 million and income before income taxes was $218 million for this quarter, compared to net revenues of $216 million and income before income taxes of $82 million for the same period in 2013.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on June 13, 2014 to shareholders of record as of May 30, 2014.

Business Highlights
  • 61% pretax profit margin for this quarter, up from 38% in the year-ago quarter and 42% average for prior year.
  • 60% Electronic Brokerage pretax profit margin for this quarter.
  • Customer equity grew 38% from the year-ago quarter to $49.0 billion and customer debits increased by 30%, to $14.4 billion.
  • Customer accounts grew 16% from the year-ago quarter to 252 thousand.
  • Total DARTs increased 25% from the year-ago quarter to 582 thousand.
  • Brokerage segment equity was $2.5 billion. Total equity was $5.2 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes increased 21%, to $134 million, in the quarter ended March 31, 2014 compared to the same period last year. Commissions and execution fees increased 14% from the year-ago quarter, reflecting growth in customer accounts and higher average trading activity per customer. Net interest income grew 23% from the year-ago quarter, to $66 million in this quarter. Pretax profit margin was 60% for this quarter, up from 57% in the same period last year.

Total DARTs (1) for cleared and execution-only customers increased 25% to 582,000 from the year-ago quarter. Cleared DARTs were 527,000 in this quarter, 25% higher than the same period last year.

Customer accounts grew 16% to 252,000 from the year-ago quarter. Customer equity increased 38%, to $49.0 billion, from the year-ago quarter. The size of an average customer account continued to grow to $195 thousand in equity per cleared customer account at the end of this quarter.

Customer margin borrowings were $3.3 billion higher than at the same time last year, ending the quarter at $14.4 billion.

Market Making

Market Making segment income before income taxes increased to $88 million, for the quarter ended March 31, 2014 from $29 million loss for the same period in 2013. Removing the effects of currency translation, the Market Making segment produced $67 million pretax income in this quarter, compared to $32 million for the same period last year. Increase in profit was driven by higher volatility as measured by the CBOE Volatility Index (VIX), a higher actual to implied volatility ratio and higher trading volumes.

Currency translation gain was $21 million in this quarter, compared to a $61 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 diversification program increased our comprehensive earnings by $24 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.4%. The effects of currency diversification are reported as components of (1) Market Making Trading Gains and (2) Other Comprehensive Income (“OCI”). In this quarter 85% 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.

_____________________

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, April 15, 2014, 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 SUBSIDIARIESOPERATING 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

 
2010 75,169 133,658 18,732 227,559 905

 
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

 
2013 65,320 8 % 173,849 16 % 18,489 15 % 257,658 14 % 1,029

 

 
1Q2013 16,567 39,576 4,350 60,493 1,008

 
1Q2014 15,643 -6 % 50,727 28 % 4,862 12 % 71,232 18 % 1,168

 
 

 

CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
 
TOTAL Options

 

%
Futures*

 

%
Stocks

 

%

Period
(contracts) Change (contracts) Change (shares) Change
2010 678,856 96,193 84,469,874
2011 789,370 16 % 106,640 11 % 77,730,974 -8 %
2012 698,140 -12 % 98,801 -7 % 65,872,960 -15 %
2013 659,673 -6 % 121,776 23 % 95,479,739 45 %
 
1Q2013 167,090 28,563 21,654,862
1Q2014 161,578 -3 % 30,661 7 % 44,707,956 106 %
 

 

MARKET MAKING
Options

 

%
Futures*

 

%
Stocks

 

%

Period
(contracts) Change (contracts) Change (shares) Change
2010 435,184 15,371 19,165,000
2011 503,053 16 % 15,519 1 % 11,788,769 -38 %
2012 457,384 -9 % 12,660 -18 % 9,339,465 -21 %
2013 404,490 -12 % 18,184 44 % 12,849,729 38 %
 
1Q2013 106,840 4,352 2,991,476
1Q2014 89,079 -17 % 4,575 5 % 2,958,853 -1 %
 

 

BROKERAGE TOTAL
Options

 

%
Futures*

 

%
Stocks

 

%

Period
(contracts) Change (contracts) Change (shares) Change
2010 243,672 80,822 65,304,874
2011 286,317 18 % 91,121 13 % 65,942,205 1 %
2012 240,756 -16 % 86,141 -5 % 56,533,495 -14 %
2013 255,183 6 % 103,592 20 % 82,630,010 46 %
 
1Q2013 60,250 24,211 18,663,386
1Q2014 72,499 20 % 26,086 8 % 41,749,103 124 %
 

* Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED
             
 

BROKERAGE CLEARED
Options % Futures* % Stocks %

Period     

 
(contracts) Change (contracts) Change (shares) Change

2010

 
103,054 79,144 62,077,741

2011

 
145,993 42% 89,610 13% 63,098,072 2%

2012

 
144,539 -1% 84,794 -5% 54,371,351 -14%

2013

 
180,660 25%

101,732
20% 78,829,785 45%
 

1Q2013

 
41,850 23,757 17,868,548

1Q2014

 
54,367 30% 25,694 8% 40,576,558 127%
 
 
* Includes options on futures
BROKERAGE STATISTICS      
(in 000's, except % and where noted)
1Q2014 1Q2013 % Change
Total Accounts 252 217 16%
Customer Equity (in billions) * $49.0 $35.6 38%
 
Cleared DARTs 527 422 25%
Total Customer DARTs 582 465 25%
 
 
 
Cleared Customers (in $'s, except DART per account)
Commission per DART $4.14 $4.61 -10%
DART per Avg. Account (Annualized) 539 496 9%
Net Revenue per Avg. Account (Annualized) $3,661 $3,741 -2%
 

* Excludes non-customers. Approximately 8% 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
Ended March 31,
2014

2013
(in millions)
 
Electronic Brokerage Net revenues $223.7 $195.3
Non-interest expenses 89.4 84.3
 
Income before income taxes $134.3 $111.0
 
Pre-tax profit margin 60% 57%
 
Market Making Net revenues $133.1 $23.6
Non-interest expenses 45.0 52.6
 
Income (loss) before income taxes $88.1 ($29.0)
 
Pre-tax profit margin 66% -123%
 
Corporate* Net revenues ($1.9) ($2.8)
Non-interest expenses 2.4 (3.0)
 
Income (loss) before income taxes ($4.3) $0.2
 
 
Total Net revenues $354.9 $216.1
Non-interest expenses 136.8 133.9
 
Income before income taxes $218.1 $82.2
 
Pre-tax profit margin 61% 38%
 
 
* 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
Ended March 31,
2014 2013
(in millions, except share and per share data)
 
Revenues:
Trading gains $127.5 $19.0
Commissions and execution fees 136.6 119.6
Interest income 86.0 70.5
Other income 19.1 19.9
 
Total revenues 369.2 229.0
 
Interest expense 14.3 12.9
 
Total net revenues 354.9 216.1
 
Non-interest expenses:
Execution and clearing 54.2 59.5
Employee compensation and benefits 53.5 46.3
Occupancy, depreciation and amortization 9.8 10.1
Communications 6.0 5.5
General and administrative 13.3 12.5
 
Total non-interest expenses 136.8 133.9
 
Income before income taxes 218.1 82.2
 
Income tax expense 16.9 6.9
 
Net income 201.2 75.3
 
Net income attributable to noncontrolling interests 182.1 68.7
 
Net income attributable to common stockholders $19.1 $6.6
 
Net income available for common stockholders $19.1 $6.6
 
Earnings per share :
Basic $0.35 $0.14
Diluted $0.34 $0.14
 
Weighted average common shares outstanding:
Basic 54,664,225 47,499,898
Diluted 56,041,282 47,688,314
 
Comprehensive income:
Net income available for common stockholders $19.1 $6.6
Other comprehensive income:
Cumulative translation adjustment, before income taxes 0.5 (3.8)
Income taxes related to items of other comprehensive income 0.1 0.0
Other comprehensive income (loss), net of tax 0.4 (3.8)
Comprehensive income available for common stockholders $19.5 $2.8
 
Comprehensive income attributable to noncontrolling interests:

 

 

Net income attributable to noncontrolling interests
182.1 $68.7

 

Other comprehensive income (loss) - cumulative translation adjustment
3.1 (27.6)
Comprehensive income attributable to noncontrolling interests $185.2 $41.1

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

EARNINGS PER SHARE ON COMPREHENSIVE INCOME

(UNAUDITED)
     
Three Months
Ended March 31,
2014 2013
(in millions, except share and per share data)
 
 
Comprehensive income available for common stockholders, net of tax $19.5 $2.8
 
Comprehensive income per share:
Basic $0.36 $0.06
Diluted $0.35 $0.06
 
 
Weighted average common shares outstanding:
Basic 54,664,225 47,499,898
Diluted 56,041,282 47,688,314

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)
     
March 31,

2014
December 31,

2013
(in millions)
 
Assets
Cash and cash equivalents $991.4 $1,213.2
Cash and securities - segregated for regulatory purposes 15,579.7 13,991.7
Securities purchased under agreements to resell 282.7 386.3
Securities borrowed 2,846.5 2,751.5
Trading assets, at fair value 3,428.2 4,448.8
Receivables from customers, net of allowance 14,413.6 13,596.7
Receivables from brokers, dealers and clearing organizations 902.2 858.2
Other assets 536.1 624.3
 
Total assets $38,980.4 $37,870.7
 
Liabilities and equity
 
Liabilities
Trading liabilities - financial instruments sold but not yet purchased, at fair value $3,170.6 $3,153.7
Securities loaned 2,931.2 2,563.7
Short-term borrowings 33.6 24.6
Other payables:
Customers 26,975.6 26,319.4
Brokers, dealers and clearing organizations 241.4 331.0
Other payables 383.8 386.2
27,600.8 27,036.6
 
Equity
Stockholders' equity 723.0 707.3
Noncontrolling interests 4,521.2 4,384.8
Total equity 5,244.2 5,092.1
 
Total liabilities and equity $38,980.4 $37,870.7

Copyright Business Wire 2010

If you liked this article you might like

Bitcoin Today: Cryptocurrencies Storm Back Thursday, Bulls Rejoice

Bitcoin Today: Cryptocurrencies Storm Back Thursday, Bulls Rejoice

These Bitcoin Stocks Are Rallying as Cryptos Crater

These Bitcoin Stocks Are Rallying as Cryptos Crater

How to Make Money Off Your Brokerage Account by Doing Nothing

How to Make Money Off Your Brokerage Account by Doing Nothing

Can You Spare $150K for Priceline?

Can You Spare $150K for Priceline?

How Sprint, Sirius XM and Interactive Brokers Could Blast Higher in April

How Sprint, Sirius XM and Interactive Brokers Could Blast Higher in April