Exhibit 99.1
INTERACTIVE BROKERS GROUP ANNOUNCES THIRD QUARTER RESULTS
REPORTS INCOME BEFORE TAXES OF $307.9 MILLION ON $445.1 MILLION IN NET REVENUES, EARNINGS PER SHARE OF $0.53
GREENWICH, CONN, October 25, 2007 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic market maker and broker, today reported diluted earnings per share of $0.53 for the quarter ended September 30, 2007, compared to pro forma $0.40 for the same period in 2006.
Net revenues were $445.1 million and income before income taxes was $307.9 million for the quarter, compared to net revenues of $339.8 million and income before income taxes of $220.1 million for the same period in 2006.
Business Highlights
• 69.2% pre-tax margin.
• Diluted earnings per share increased 32.5% year over year.
• Electronic Brokerage pre-tax income up 114.9% year over year and 25.7% sequentially.
• 50.4% Electronic Brokerage pre-tax margin.
• Cleared DARTs increased by 51.7% year over year, to 228,000.
• Market Making pre-tax income up 26.8% year over year and 110.4% sequentially.
• 74.4% Market Making pre-tax margin.
• Market Making options contract volume increased 46.6% year over year and 26.9% sequentially.
“The third quarter was an all time record for us, both in our brokerage and in our market making businesses, as both segments benefited from increased volatility and trading volumes in the exchange-listed derivatives space,” said Thomas Peterffy, Chairman and CEO. “In our brokerage business we exceeded the 51% year on year earnings growth we have clocked in the last quarter by coming in with a growth rate over 100% for the current quarter. We are especially gratified by the 74% year on year increase in our cleared customers option volume because it validates the large investment we continue to make in bringing to our customers the best options trading technology available globally*. Our record results in market making, in a quarter that was challenging for many of our competitors, demonstrate the advantages of our automated systems that adapt quickly to turbulent markets where liquidity is most needed.”
* For a list of features included in the latest update to our brokerage platform please see www.interactivebrokers.com/ibnews.
1
Segment Overview
Electronic Brokerage
Electronic Brokerage segment income before income taxes increased 114.9% in the quarter ended September 30, 2007 compared with the same period in 2006 and 25.7% sequentially, reflecting higher revenues from commission and execution fees and growth in net interest income. Pre-tax margin increased from 44.4% in the prior quarter to 50.4% for the quarter ended September 30, 2007, reflecting leverage from automation. Total DARTs for cleared and execution-only customers increased 46.0% to 270,000 during the three months ended September 30, 2007, compared to 185,000 during the three months ended September 30, 2006. Cleared DARTs increased by 51.7% to 228,000, as compared to the same period in 2006.
Market Making
Market Making segment income before income taxes increased 26.8% in the quarter ended September 30, 2007 compared with the same period in 2006 and 110.4% sequentially. Pre-tax margin increased from 61.5% in the prior quarter to 74.4% for the quarter ended September 30, 2007. High market volumes and increased volatility leveraged benefits of our automated trading system and integrated real time risk management. Market Making options contract volume in the quarter ended September 30, 2007 increased by 46.6% from the same period in 2006. In addition, our strong capital base was helpful at a time of constrained liquidity.
2
Conference Call Information:
Interactive Brokers Group will hold a conference call with investors today, October 25, 2007, at 5:30 p.m. EST to discuss its third quarter results. Investors who would like to listen to the conference call live should dial 888-264-8952 (U.S. domestic) and 913-312-9321 (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 is an automated global electronic market maker and broker specializing in routing orders and executing and processing trades in securities, futures and foreign exchange instruments as a member of more than 60 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 direct access to stocks, options, futures, forex and bonds from a single IB Universal AccountSM. Employing proprietary software on a global communications network, Interactive Brokers Group continuously integrates 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.
For Interactive Brokers Group, Inc. Media: Andrew Wilkinson, 203-913-1369 or Investors: 888-919-0022 (domestic) and 312-542-6890 (international).
3
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA
TRADE VOLUMES:
(in 000’s, except %)
|
| Market |
|
|
|
|
|
|
| Non |
|
|
|
|
|
|
| Av. Trades |
|
|
| Making |
| % |
| Cleared |
| % |
| Cleared |
| % |
| Total |
| % |
| per US |
|
Period |
| Trades |
| change |
| trades |
| change |
| trades |
| change |
| Trades |
| change |
| Trading Day |
|
2003 |
| 32,772 |
|
|
| 22,748 |
|
|
| 2,367 |
|
|
| 57,887 |
|
|
| 230 |
|
2004 |
| 41,506 |
| 27 | % | 28,876 |
| 27 | % | 2,932 |
| 24 | % | 73,314 |
| 27 | % | 290 |
|
2005 |
| 54,044 |
| 30 | % | 34,800 |
| 21 | % | 7,380 |
| 152 | % | 96,224 |
| 31 | % | 382 |
|
2006 |
| 66,043 |
| 22 | % | 51,238 |
| 47 | % | 12,828 |
| 74 | % | 130,109 |
| 35 | % | 518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3Q2006 |
| 16,952 |
|
|
| 12,317 |
|
|
| 2,778 |
|
|
| 32,047 |
|
|
| 509 |
|
3Q2007 |
| 27,203 |
| 60 | % | 19,092 |
| 55 | % | 3,878 |
| 40 | % | 50,173 |
| 57 | % | 796 |
|
CONTRACT AND SHARE VOLUMES:
(in 000’s, except %)
TOTAL
|
| Options |
| % |
| Futures* |
| % |
| Stocks |
| % |
|
Period |
| (contracts) |
| change |
| (contracts) |
| change |
| (shares) |
| change |
|
2003 |
| 194,358 |
|
|
| 31,034 |
|
|
| 17,038,250 |
|
|
|
2004 |
| 269,715 |
| 39 | % | 37,748 |
| 22 | % | 17,487,528 |
| 3 | % |
2005 |
| 409,794 |
| 52 | % | 44,560 |
| 18 | % | 21,925,120 |
| 25 | % |
2006 |
| 563,623 |
| 38 | % | 62,419 |
| 40 | % | 34,493,410 |
| 57 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3Q2006 |
| 130,966 |
|
|
| 16,112 |
|
|
| 8,697,086 |
|
|
|
3Q2007 |
| 178,906 |
| 37 | % | 22,330 |
| 39 | % | 12,805,676 |
| 47 | % |
MARKET MAKING
|
| Options |
| % |
| Futures* |
| % |
| Stocks |
| % |
|
Period |
| (contracts) |
| change |
| (contracts) |
| change |
| (shares) |
| change |
|
2003 |
| 177,459 |
|
|
| 6,638 |
|
|
| 12,578,584 |
|
|
|
2004 |
| 236,569 |
| 33 | % | 10,511 |
| 58 | % | 12,600,280 |
| 0 | % |
2005 |
| 308,613 |
| 30 | % | 11,551 |
| 10 | % | 15,625,801 |
| 24 | % |
2006 |
| 371,929 |
| 21 | % | 14,818 |
| 28 | % | 21,180,377 |
| 36 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3Q2006 |
| 85,760 |
|
|
| 3,949 |
|
|
| 5,268,608 |
|
|
|
3Q2007 |
| 125,720 |
| 47 | % | 3,805 |
| -4 | % | 6,867,410 |
| 30 | % |
BROKERAGE TOTAL
|
| Options |
| % |
| Futures* |
| % |
| Stocks |
| % |
|
Period |
| (contracts) |
| change |
| (contracts) |
| change |
| (shares) |
| change |
|
2003 |
| 16,898 |
|
|
| 24,396 |
|
|
| 4,459,667 |
|
|
|
2004 |
| 33,146 |
| 96 | % | 27,237 |
| 12 | % | 4,887,247 |
| 10 | % |
2005 |
| 101,181 |
| 205 | % | 33,009 |
| 21 | % | 6,299,319 |
| 29 | % |
2006 |
| 191,694 |
| 89 | % | 47,601 |
| 44 | % | 13,313,033 |
| 111 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3Q2006 |
| 45,206 |
|
|
| 12,163 |
|
|
| 3,428,478 |
|
|
|
3Q2007 |
| 53,186 |
| 18 | % | 18,525 |
| 52 | % | 5,938,266 |
| 73 | % |
* Includes options on futures
4
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED
CONTRACT AND SHARE VOLUMES:
(in 000’s, except %)
BROKERAGE CLEARED
Period |
| Options |
| % |
| Futures* |
| % |
| Stocks |
| % |
|
2003 |
| 11,351 |
|
|
| 19,086 |
|
|
| 3,612,503 |
|
|
|
2004 |
| 16,438 |
| 45 | % | 24,118 |
| 26 | % | 4,339,462 |
| 20 | % |
2005 |
| 23,456 |
| 43 | % | 30,646 |
| 27 | % | 5,690,308 |
| 31 | % |
2006 |
| 32,384 |
| 38 | % | 45,351 |
| 48 | % | 12,492,870 |
| 120 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3Q2006 |
| 7,823 |
|
|
| 11,577 |
|
|
| 3,241,663 |
|
|
|
3Q2007 |
| 13,637 |
| 74 | % | 17,844 |
| 54 | % | 5,217,253 |
| 61 | % |
* Includes options on futures
BROKERAGE STATISTICS
(in 000’s, except % and where noted)
|
| 3Q2007 |
| 3Q2006 |
| % Change |
| ||
Total Accounts |
| 90 |
| 74 |
| 22 | % | ||
Customer Equity (in Billions) * |
| $ | 8.3 |
| $ | 5.4 |
| 54 | % |
|
|
|
|
|
|
|
| ||
Cleared DARTs |
| 228 |
| 151 |
| 52 | % | ||
Total Customer DARTs |
| 270 |
| 185 |
| 46 | % | ||
(in $’s, except DART per account) |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Avg. Commission per DART |
| $ | 4.58 |
| $ | 4.31 |
|
|
|
Avg. DART per Account (Annualized) |
| 652 |
| 517 |
|
|
| ||
Avg. Net Revenue per Account (Annualized) |
| $ | 4,344 |
| $ | 3,293 |
|
|
|
* Excluding Non-Customers
5
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
|
| Three Months |
| |||
|
| 2007 |
| 2006 |
| |
|
| (in millions) |
| |||
|
|
|
|
|
| |
Market Making | Net revenues |
| $329.5 |
| $264.6 |
|
| Non-interest expenses |
| 84.4 |
| 71.3 |
|
|
|
|
|
|
|
|
| Income before income taxes |
| $245.1 |
| $193.3 |
|
|
|
|
|
|
|
|
| Pre-tax profit margin |
| 74 | % | 73 | % |
|
|
|
|
|
|
|
Electronic Brokerage | Net revenues |
| $111.7 |
| $75.4 |
|
| Non-interest expenses |
| 55.4 |
| 49.2 |
|
|
|
|
|
|
|
|
| Income before income taxes |
| $56.3 |
| $26.2 |
|
|
|
|
|
|
|
|
| Pre-tax profit margin |
| 50 | % | 35 | % |
|
|
|
|
|
|
|
Corporate | Net revenues |
| $3.9 |
| $(0.2 | ) |
| Non-interest expenses |
| (2.6 | ) | (0.8 | ) |
|
|
|
|
|
|
|
| Income before income taxes |
| $6.5 |
| $0.6 |
|
|
|
|
|
|
|
|
Total | Net revenues |
| $445.1 |
| $339.8 |
|
| Non-interest expenses |
| 137.2 |
| 119.7 |
|
|
|
|
|
|
|
|
| Income before income taxes |
| $307.9 |
| $220.1 |
|
|
|
|
|
|
|
|
| Pre-tax profit margin |
| 69 | % | 65 | % |
6
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
|
| Three Months |
| ||||
|
| Ended September 30, |
| ||||
|
| Actual |
| Pro forma |
| ||
|
| 2007 |
| 2006 |
| ||
|
| (in millions except share and per share data) |
| ||||
|
|
|
|
|
| ||
Revenues: |
|
|
|
|
| ||
Trading gains |
| $ | 289.2 |
| $ | 229.5 |
|
Commissions and execution fees |
| 69.5 |
| 42.8 |
| ||
Interest income |
| 207.6 |
| 183.3 |
| ||
Other income |
| 21.6 |
| 18.7 |
| ||
|
|
|
|
|
| ||
Total revenues |
| 587.9 |
| 474.3 |
| ||
|
|
|
|
|
| ||
Interest expense |
| 142.8 |
| 134.5 |
| ||
|
|
|
|
|
| ||
Total net revenues |
| 445.1 |
| 339.8 |
| ||
|
|
|
|
|
| ||
Non-interest expenses: |
|
|
|
|
| ||
Execution and clearing |
| 85.1 |
| 76.7 |
| ||
Employee compensation and benefits |
| 31.0 |
| 28.3 |
| ||
Occupancy, depreciation and amortization |
| 6.7 |
| 5.1 |
| ||
Communications |
| 4.1 |
| 3.2 |
| ||
General and administrative |
| 10.3 |
| 6.4 |
| ||
|
|
|
|
|
| ||
Total non-interest expenses |
| 137.2 |
| 119.7 |
| ||
|
|
|
|
|
| ||
Income before income taxes |
| 307.9 |
| 220.1 |
| ||
|
|
|
|
|
| ||
Income tax expense |
| 27.3 |
| 11.4 |
| ||
Minority interest |
| (258.4 | ) | (191.8 | ) | ||
|
|
|
|
|
| ||
Net income |
| $ | 22.2 |
| $ | 16.9 |
|
|
|
|
|
|
| ||
Earnings per share |
|
|
|
|
| ||
Basic |
| $ | 0.55 |
| $ | 0.42 |
|
Diluted |
| $ | 0.53 |
| $ | 0.40 |
|
|
|
|
|
|
| ||
Weighted average common shares outstanding |
|
|
|
|
| ||
Basic |
| 40,142,196 |
| 40,142,196 |
| ||
Diluted |
| 401,315,481 |
| 401,317,852 |
|
7
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
3Q06 PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
|
| Three Months Ended September 30, 2006 |
| |||||||
|
| Historical |
| Adjustments |
| Pro Forma(1) |
| |||
|
| (dollars in millions except share and per share data) |
| |||||||
Revenues: |
|
|
|
|
|
|
| |||
Trading gains |
| $ | 229.5 |
| $ | — |
| $ | 229.5 |
|
Commissions and execution fees |
| 42.8 |
| — |
| 42.8 |
| |||
Interest income |
| 183.3 |
| — |
| 183.3 |
| |||
Other income |
| 18.7 |
| — |
| 18.7 |
| |||
|
|
|
|
|
|
|
| |||
Total revenues |
| 474.3 |
| — |
| 474.3 |
| |||
|
|
|
|
|
|
|
| |||
Interest expense |
| 134.5 |
| — |
| 134.5 |
| |||
|
|
|
|
|
|
|
| |||
Total net revenues |
| 339.8 |
| — |
| 339.8 |
| |||
|
|
|
|
|
|
|
| |||
Non-interest expenses: |
|
|
|
|
|
|
| |||
Execution and clearing |
| 76.7 |
| — |
| 76.7 |
| |||
Employee compensation and benefits |
| 28.3 |
| — |
| 28.3 |
| |||
Occupancy, depreciation and amortization |
| 5.1 |
| — |
| 5.1 |
| |||
Communications |
| 3.2 |
| — |
| 3.2 |
| |||
General and administrative(2) |
| 6.4 |
| 0.0 |
| 6.4 |
| |||
|
|
|
|
|
|
|
| |||
Total non-interest expenses |
| 119.7 |
| 0.0 |
| 119.7 |
| |||
|
|
|
|
|
|
|
| |||
Income before income taxes |
| 220.1 |
| (0.0 | ) | 220.1 |
| |||
Income tax expense(3),(4) |
| 5.8 |
| 5.6 |
| 11.4 |
| |||
Less - Minority interest(5) |
| — |
| (191.8 | ) | (191.8 | ) | |||
|
|
|
|
|
|
|
| |||
Net income |
| $ | 214.3 |
| $ | (197.4 | ) | $ | 16.9 |
|
|
|
|
|
|
|
|
| |||
Earnings per share(6): |
|
|
|
|
|
|
| |||
Basic |
|
|
|
|
| $ | 0.42 |
| ||
Diluted |
|
|
|
|
| $ | 0.40 |
| ||
|
|
|
|
|
|
|
| |||
Weighted average common shares outstanding |
|
|
|
|
|
|
| |||
Basic |
|
|
|
|
| 40,142,196 |
| |||
Diluted |
|
|
|
|
| 401,317,852 |
|
See accompanying notes to unaudited pro forma consolidated statement of income.
8
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Represents adjustments to reflect the following:
(1) |
| Pro forma earnings per share calculations (i) include the restricted shares of Common Stock that have been issued or are to be issued pursuant to the 2007 ROI Unit Stock Plan and issuance of restricted shares of Common Stock pursuant to the 2007 Stock Incentive Plan, but (ii) exclude shares of Common Stock that are issuable in the future pursuant to the 2007 Stock Incentive Plan. |
|
|
|
(2) |
| Gives effect to Delaware franchise taxes that will be payable, estimated at $0.165 million annually. |
|
|
|
(3) |
| The income tax adjustment of $5.6 million for the three months ended September 30, 2006, represents the sum of the current income tax expense adjustment for this period (referenced in this footnote 3) and the deferred income tax expense adjustment for this period (referenced in footnote 4 below). Additional current income tax expense on our 10.49% investment in IBG LLC would be $1.4 million for the three months ended September 30, 2006. In addition to increased currently payable income taxes, we will incur increased deferred income tax expense (see footnote 4). |
|
|
|
(4) |
| Additional deferred income tax expense will be $16.6 million annually, resulting from the straight-line amortization of the deferred tax asset of $248.3 million arising from the acquisition of the 10.0% member interest in IBG LLC (see footnote 3 above) over 15 years. |
|
|
|
(5) |
| Gives effect to the 89.51% interest in IBG LLC that IBG Holdings LLC holds arising from the Recapitalization and the IPO, including initial share issuances pursuant to employee equity incentive plans. The adjustments are equal to 89.51% of total net income for the three month period ended September 30, 2006. |
|
|
|
(6) |
| Basic pro forma earnings per share are calculated based on 40.1 million shares of Common Stock and 100 shares of Class B common stock being outstanding, including 0.1 million shares issued pursuant to the employee equity incentive plans. Diluted earnings per share are calculated based on an assumed purchase by us of all remaining IBG LLC membership interests held by IBG Holdings LLC and the issuance by us of 360 million shares of Common Stock, resulting in a total of 401.3 million shares deemed outstanding as of the beginning of each period. There is no impact on earnings per share for such purchase and issuance because 100% of net income before minority interest would be available to common stockholders as IBG Holdings LLC would no longer hold a minority interest, and the full difference between the book and tax basis of IBG LLC’s assets would also be available for reducing income tax expense. Therefore, the net income utilized to calculate diluted earnings per share would be $161 million for the three month period ended September 30, 2006. |
|
|
|
|
| Diluted weighted average common shares outstanding of 401.3 million shares also includes 1.2 million shares of Common Stock to be issued pursuant to the 2007 ROI Unit Stock Plan. Shares of Common Stock to be issued in connection with the 2007 Stock Incentive Plan have been excluded from diluted weighted average common shares outstanding because such shares are non-dilutive. |
9