INTERACTIVE BROKERS GROUP ANNOUNCES 2Q10 RESULTS
— — —
REPORTS INCOME BEFORE TAXES OF $72 MILLION ON $226 MILLION IN NET REVENUES, EARNINGS PER SHARE OF $0.09
GREENWICH, CONN, July 22, 2010 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic market maker and broker, today reported diluted earnings per share of $0.09 for the quarter ended June 30, 2010, compared to diluted earnings per share of $0.31 for the same period in 2009.
Net revenues were $226 million and income before income taxes was $72 million for this quarter, compared to net revenues of $332 million and income before income taxes of $192 million for the same period in 2009.
Business Highlights
| · | 32% pre-tax profit margin for this quarter. |
| · | $4.8 billion in equity. |
| · | 20% increase in customer accounts and 43% increase in customer equity from the year-ago quarter. |
| · | Electronic Brokerage pre-tax income grew 17% from the year-ago quarter. |
| · | Cleared DARTs were 385,000 for this quarter, 21% increase from the year-ago quarter. |
| · | 50% Electronic Brokerage pre-tax profit margin for this quarter. |
| · | 5% Market Making pre-tax profit margin for this quarter. |
"Fluctuating volatilities have improved conditions for our market-making operations and our global brokerage business continues to exhibit unparalleled growth amongst our peers. Nevertheless, increasing fluctuations in foreign exchange markets have a corresponding impact on our reported results in U.S. dollars. This makes it ever more apparent that our shares would be more appropriately considered as an investment in a global enterprise based in a diversified basket of currencies rather than in U.S. dollars," said Thomas Peterffy, our CEO.
Segment Overview
Electronic Brokerage
Electronic Brokerage segment income before income taxes grew 17% in the quarter ended June 30, 2010 compared to the same period in 2009. This increase is attributable to higher commissions and higher net interest earned on customer balances. Commissions and execution fees grew by 19% and net interest income increased 59% from the same quarter last year. Customer accounts grew 20% to 146,000 and customer equity grew 43% to $16.4 billion. Cleared DARTs* grew by 21% from the year-ago quarter to 385,000. Pre-tax profit margin was 50% for this quarter. In the second quarter we lowered our commissions for U.S. futures by about 10%, on an average order. This lowered our gross margin slightly, but contributed to a 23% increase in futures trading volume from the prior quarter.
Market Making
Market Making segment income before income taxes was $3.9 million in the quarter ended June 30, 2010, a decrease of 97% from the same period last year. Pre-tax profit margin was 5% in this quarter, down from 65% in the same period last year. Foreign exchange effects of keeping Group equity in a basket of major currencies we call the GLOBAL** are reflected in the market making segment and had an estimated negative $72 million impact on trading gains in this quarter. The market making environment began to show improvements in the second quarter, with periods of wider spreads and higher actual volatility, relative to implied volatility. Market Making options contract volume increased 9% compared to the same period last yea r and 19% over the prior quarter.
| * | Daily average revenue trades (DARTs) are based on customer orders. |
| ** | Full effect of the GLOBALs in this quarter was described in a press release on July 2, 2010. |
_____________________
Conference Call Information:
Interactive Brokers Group will hold a conference call with investors today, July 22, 2010, 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 market maker and broker specializing in routing orders and executing and processing trades in securities, futures and foreign exchange instruments on more than 80 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 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: Deborah Liston, 203-618-4070.
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 |
| 2005 | 54,044 | | 34,800 | | 7,380 | | 96,224 | | 382 |
| 2006 | 66,043 | 22% | 51,238 | 47% | 12,828 | 74% | 130,109 | 35% | 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 |
| | | | | | | | | | |
| 2Q2009 | 26,434 | | 31,647 | | 2,971 | | 61,052 | | 969 |
| 2Q2010 | 20,358 | -23% | 37,404 | 18% | 4,777 | 61% | 62,539 | 2% | 993 |
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
| TOTAL | Options | % | Futures* | % | Stocks | % |
| Period | (contracts) | Change | (contracts) | Change | (shares) | Change |
| 2005 | 409,794 | | 44,560 | | 21,925,120 | |
| 2006 | 563,623 | 38% | 62,419 | 40% | 34,493,410 | 57% |
| 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% |
| | | | | | | |
| 2Q2009 | 166,588 | | 21,273 | | 19,687,486 | |
| 2Q2010 | 191,064 | 15% | 27,362 | 29% | 22,790,303 | 16% |
| | | | | | | |
| | | | | | | |
| MARKET MAKING | Options | % | Futures* | % | Stocks | % |
| Period | (contracts) | Change | (contracts) | Change | (shares) | Change |
| 2005 | 308,613 | | 11,551 | | 15,625,801 | |
| 2006 | 371,929 | 21% | 14,818 | 28% | 21,180,377 | 36% |
| 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% |
| | | | | | | |
| 2Q2009 ** | 112,490 | | 4,022 | | 7,461,905 | |
| 2Q2010 ** | 122,364 | 9% | 4,411 | 10% | 5,469,349 | -27% |
| | | | | | | |
| | | | | | | |
| BROKERAGE TOTAL | Options | % | Futures* | % | Stocks | % |
| Period | (contracts) | Change | (contracts) | Change | (shares) | Change |
| 2005 | 101,181 | | 33,009 | | 6,299,319 | |
| 2006 | 191,694 | 89% | 47,601 | 44% | 13,313,033 | 111% |
| 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% |
| | | | | | | |
| 2Q2009 | 54,098 | | 17,251 | | 12,225,581 | |
| 2Q2010 | 68,700 | 27% | 22,951 | 33% | 17,320,954 | 42% |
| * 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 |
| 2005 | 23,456 | | 30,646 | | 5,690,308 | |
| 2006 | 32,384 | 38% | 45,351 | 48% | 12,492,870 | 120% |
| 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% |
| | | | | | | |
| 2Q2009 | 24,281 | | 17,005 | | 11,666,739 | |
| 2Q2010 | 29,491 | 21% | 22,463 | 32% | 16,487,944 | 41% |
| | | | | | | |
| * Includes options on futures | | | | | |
| BROKERAGE STATISTICS | | | |
| (in 000's, except % and where noted) | | | |
| | 2Q2010 | 2Q2009 | % Change |
| Total Accounts | 146 | 122 | 20% |
| Customer Equity (in billions) * | $16.4 | $11.5 | 43% |
| | | | |
| Cleared DARTs | 385 | 317 | 21% |
| Total Customer DARTs | 422 | 345 | 22% |
| | | | |
| | | | |
| | | | |
| (in $'s, except DART per account) | | | |
| Commission per DART | $4.24 | $4.32 | -2% |
| DART per Avg. Account (Annualized) | 677 | 674 | 0% |
| Net Revenue per Avg. Account (Annualized) | $3,808 | $3,745 | 2% |
| | | | |
| * Excludes non-customers | | | |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
| | | Three Months | | Six Months | |
| | | Ended June 30, | | Ended June 30, | |
| | | 2010 | | 2009 | | 2010 | | 2009 | |
| | | (in millions) |
| | | | | | | | | | |
| Market Making | Net revenues | $81.7 | | $218.9 | | $164.5 | | $400.9 | |
| | Non-interest expenses | 77.8 | | 77.4 | | 155.1 | | 141.2 | |
| | | | | | | | | | |
| | Income before income taxes | | | $141.5 | | $9.4 | | $259.7 | |
| | | | | | | | | | |
| | Pre-tax profit margin | 5% | | 65% | | 6% | | 65% | |
| | | | | | | | | | |
| Electronic Brokerage | Net revenues | $144.6 | | $120.4 | | $271.8 | | $227.8 | |
| | Non-interest expenses | 72.3 | | 58.4 | | 135.1 | | 120.3 | |
| | | | | | | | | | |
| | Income before income taxes | $72.3 | | $62.0 | | 136.7 | | $107.5 | |
| | | | | | | | | | |
| | Pre-tax profit margin | 50% | | 51% | | 50% | | 47% | |
| | | | | | | | | | |
| Corporate* | Net revenues | ($0.2 | ) | $(7.2 | ) | $0.4 | | ($0.3 | ) |
| | Non-interest expenses | 3.9 | | 4.1 | | 9.5 | | 7.8 | |
| | | | | | | | | | |
| | Income before income taxes | ($4.1 | ) | $(11.3 | ) | $(9.1 | ) | ($8.1 | ) |
| | | | | | | | | | |
| | | | | | | | | | |
| Total | Net revenues | $226.1 | | $332.1 | | $436.7 | | $628.4 | |
| | Non-interest expenses | 154.0 | | 139.9 | | 299.7 | | 269.3 | |
| | | | | | | | | | |
| | Income before income taxes | $72.1 | | $192.2 | | $137.0 | | $359.1 | |
| | | | | | | | | | |
| | Pre-tax profit margin | 32% | | 58% | | 31% | | 57% | |
| | | | | | | | | | |
| | | | | | | | | | |
| * Corporate includes corporate related activities as well as inter-segment eliminations. | | | | | |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| | | | Three Months | | Six Months |
| | | | Ended June 30, | | Ended June 30, |
| | | | 2010 | | 2009 | | 2010 | | 2009 |
| | | | (in millions, except share and per share data) |
| | | | | | | | | | |
| Revenues: | | | | | | | |
| | Trading gains | $77.6 | | $223.6 | | $158.2 | | $404.1 |
| | Commissions and execution fees | 107.6 | | 90.2 | | 199.3 | | 174.5 |
| | Interest income | 41.0 | | 33.5 | | 77.6 | | 59.8 |
| | Other income | 17.7 | | 7.6 | | 34.5 | | 29.0 |
| | | | | | | | | | |
| | | Total revenue | 243.9 | | 354.9 | | 469.6 | | 677.4 |
| | | | | | | | | | |
| | Interest expense | 17.8 | | 22.8 | | 32.9 | | 39.0 |
| | | | | | | | | | |
| | | Total net revenues | 226.1 | | 332.1 | | 436.7 | | 628.4 |
| | | | | | | | | | |
| Non-interest expenses: | | | | | | | |
| | Execution and clearing | 75.5 | | 70.8 | | 145.2 | | 131.9 |
| | Employee compensation and benefits | 49.5 | | 42.5 | | 100.0 | | 85.3 |
| | Occupancy, depreciation and amortization | 9.2 | | 9.9 | | 18.4 | | 19.5 |
| | Communications | 6.3 | | 5.5 | | 11.7 | | 10.5 |
| | General and administrative | 13.5 | | 11.2 | | 24.4 | | 22.1 |
| | | | | | | | | | |
| | | Total non-interest expenses | 154.0 | | 139.9 | | 299.7 | | 269.3 |
| | | | | | | | | | |
| Income before income taxes | 72.1 | | 192.2 | | 137.0 | | 359.1 |
| | | | | | | | | | |
| Income tax expense | 7.4 | | 25.3 | | 12.6 | | 37.1 |
| | | | | | | | | | |
| Net income | 64.7 | | 166.9 | | 124.4 | | 322.0 |
| | | | | | | | | | |
| Net income attributable to non-controlling interests | 60.9 | | 154.1 | | 116.7 | | 296.6 |
| | | | | | | | | | |
| Net income available for common shareholders | $3.8 | | $12.8 | | $7.7 | | $25.4 |
| | | | | | | | | | |
| | | | | | | | | | |
| Earnings per share: | | | | | | | |
| | Basic | $0.09 | | $0.31 | | $0.18 | | $0.62 |
| | Diluted | $0.09 | | $0.31 | | $0.18 | | $0.61 |
| | | | | | | | | | |
| Weighted average common shares outstanding: | 41,802,541 | | 40,916,760 | | 41,511,328 | | 40,727,787 |
| | Basic | 42,441,995 | | 41,758,253 | | 42,206,384 | | 41,622,406 |
| | Diluted | | | | | | | |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | | June 30, | | December 31, |
| | | 2010 | | 2009 |
| | | (in millions) |
| Assets | | | |
| Cash and cash equivalents | $1,111.0 | | $806.6 |
| Cash and securities - segregated for regulatory purposes | 6,027.3 | | 6,728.9 |
| Securities purchased under agreements to resell | 1,669.8 | | 413.0 |
| Securities borrowed | 4,113.2 | | 5,063.0 |
| Trading assets, at fair value | 8,992.1 | | 9,344.0 |
| Receivables from customers, net of allowance | 4,443.1 | | 3,239.6 |
| Receivables from brokers, dealers and clearing organizations | 608.9 | | 493.1 |
| Other assets | 516.3 | | 517.4 |
| | | | | |
| | Total assets | $27,481.7 | | $26,605.6 |
| | | | | |
| Liabilities and equity | | | |
| | | | | |
| Liabilities | | | |
| Trading liabilities - financial instruments sold but not yet purchased, at fair value | $7,912.3 | | $8,763.2 |
| Securities loaned | 1,410.2 | | 1,133.7 |
| Short-term borrowings | 150.5 | | 320.8 |
| Other payables: | | | |
| | Customers | 11,977.5 | | 10,587.7 |
| | Brokers, dealers and clearing organizations | 453.7 | | 164.5 |
| | Other payables | 503.1 | | 552.8 |
| | | 12,934.3 | | 11,305.0 |
| | | | | |
| Senior notes payable and senior secured credit facility | 230.9 | | 205.8 |
| | | | | |
| Equity | | | |
| Stockholders' equity | 601.1 | | 574.9 |
| Non-controlling interests | 4,242.4 | | 4,302.2 |
| | Total equity | 4,843.5 | | 4,877.1 |
| | | | | |
| | Total liabilities and equity | | | $26,605.6 |
| | | | | |
