Interactive Brokers Group, Inc. - FORM 8-K - EX-99.1 - IBKE 2Q2011 EARNINGS PRESS RELEASE - July 21, 2011

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Exhibit 99.1
 
INTERACTIVE BROKERS GROUP ANNOUNCES 2Q2011 RESULTS

— — —

REPORTS INCOME BEFORE TAXES OF $149 MILLION ON $297 MILLION IN NET REVENUES, EARNINGS PER SHARE OF $0.22 AND EARNINGS PER SHARE ON  COMPREHENSIVE INCOME OF $0.31.


GREENWICH, CONN, July 21, 2011 — 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."

 
1
 


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'searnings, 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 US 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.
 
 
 
 
2
 

 
 
_____________________
 



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 AccountSM.  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.



For Interactive Brokers Group, Inc. Media: Andrew Wilkinson, 203-913-1369 or Investors: Deborah Liston, 203-618-4070.


 
3
 

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.
 

 
4
 

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
      


 
5
 
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.
              

 
6
 

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
  

 
 
 
7
 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

 
   
June 30, 2011
  
December 31, 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
         

 
8
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
 EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)


   
Three months ended
  
Six months ended
  
   
June 30,
  
June 30,
  
   
2011
  
2010
  
2011
  
2010
  
    (in millions, except share and per share data)  
                   
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
  


Interactive Brokers Group, Inc. Reports