Interactive Brokers Group Announces 3Q2015 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 $0.23 for the quarter ended September 30, 2015, compared to a diluted loss per share on a comprehensive basis of $0.13 for the same period in 2014.

Excluding other comprehensive income, the Company reported diluted earnings per share of $0.35 for the quarter ended September 30, 2015, compared to diluted earnings per share of $0.05 for the same period in 2014.

Net revenues were $359 million and income before income taxes was $202 million this quarter, compared to net revenues of $171 million and income before income taxes of $40 million for the same period in 2014.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 14, 2015 to shareholders of record as of December 1, 2015.

Business Highlights

  • 61% Electronic Brokerage pretax profit margin for this quarter, down from 63% in the year-ago quarter.
  • 51% Market Making pretax profit margin for this quarter, up from 14% in the year-ago quarter.
  • Customer equity grew 13% from the year-ago quarter to $62.1 billion while customer debits decreased by 9% to $15.8 billion.
  • Customer accounts increased 18% from the year-ago quarter to 322 thousand.
  • Total DARTs increased 28% from the year-ago quarter to 683 thousand.
  • Brokerage segment equity was $3.4 billion. Total equity was $5.3 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes increased 19%, to $184 million, in the quarter ended September 30, 2015 compared to the same period last year, due to higher commissions revenue and net interest income. Customer accounts grew 18% to 322 thousand and customer equity increased 13% to $62.1 billion from the year-ago quarter.

Commissions and execution fees increased 26% from the year-ago quarter, to $168 million. Net interest income grew 11% from the year-ago quarter, to $102 million. Pretax profit margin was 61% in quarter ended September 30, 2015, down from 63% in same period last year.

Total DARTs(1) for cleared and execution-only customers increased 28% from the year-ago quarter to 683 thousand. Cleared DARTs were 620 thousand, 28% higher than the same period last year.

Market Making

Market Making segment income before income taxes increased 557%, to $46 million, in the quarter ended September 30, 2015 compared to the same period last year, driven by higher volatility and active trading in the late-August period. Pretax profit margin increased to 51% in the current quarter from 14% in same period last year.

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 strategy decreased our comprehensive earnings by $76 million, as the U.S. dollar value of the GLOBAL decreased by approximately 1.5%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the Corporate segment and (2) Other Comprehensive Income (“OCI”). As previously disclosed, certain reclassifications have been made to previously reported amounts to conform to the current presentation of currency translation gains and losses related to our currency diversification strategy.

(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, October 20, 2015, 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 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.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA

TRADE VOLUMES:
(in 000's, except %)Brokerage
MarketBrokerageNonAvg. Trades
Making%Cleared%Cleared%Total%per U.S.
PeriodTradesChangeTradesChangeTradesChangeTradesChangeTrading Day
2012 60,421 150,000 16,118 226,540 904
2013 65,320 8% 173,849 16% 18,489 15% 257,658 14% 1,029
2014 64,530 -1% 206,759 19% 18,055 -2% 289,344 12% 1,155
3Q2014 17,864 49,636 4,282 71,782 1,130
3Q2015 18,696 5% 65,333 32% 5,266 23% 89,295 24% 1,395
2Q2015 14,852 58,458 4,060 77,370 1,228
3Q2015 18,696 26% 65,333 12% 5,266 30% 89,295 15% 1,395
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
TOTALOptions%Futures*%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change
2012 698,140 98,801 65,872,960
2013 659,673 -6% 121,776 23% 95,479,739 45%
2014 631,265 -4% 123,048 1% 153,613,174 61%
3Q2014 151,768 29,352 36,040,255
3Q2015 179,786 18% 38,960 33% 41,999,917 17%
2Q2015 144,188 34,661 60,255,458
3Q2015 179,786 25% 38,960 12% 41,999,917 -30%
MARKET MAKINGOptions%Futures*%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change
2012 457,384 12,660 9,339,465
2013 404,490 -12% 18,184 44% 12,849,729 38%
2014 344,741 -15% 15,668 -14% 12,025,822 -6%
3Q2014 81,395 3,542 3,137,329
3Q2015 95,754 18% 3,868 9% 4,458,343 42%
2Q2015 74,533 3,652 4,270,738
3Q2015 95,754 28% 3,868 6% 4,458,343 4%
BROKERAGE TOTALOptions%Futures*%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change
2012 240,756 86,141 56,533,495
2013 255,183 6% 103,592 20% 82,630,010 46%
2014 286,524 12% 107,380 4% 141,587,352 71%
3Q2014 70,373 25,810 32,902,926
3Q2015 84,032 19% 35,092 36% 37,541,574 14%
2Q2015 69,655 31,009 55,984,720
3Q2015 84,032 21% 35,092 13% 37,541,574 -33%
* Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED

BROKERAGE CLEAREDOptions%Futures*%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change
2012 144,539 84,794 54,371,351
2013 180,660 25% 101,732 20% 78,829,785 45%
2014 225,662 25% 106,074 4% 137,153,132 74%
3Q2014 56,824 25,559 31,814,664
3Q2015 68,018 20% 34,635 36% 36,475,917 15%
2Q2015 57,867 30,717 55,144,248
3Q2015 68,018 18% 34,635 13% 36,475,917 -34%
* Includes options on futures
BROKERAGE STATISTICS
(in 000's, except % and where noted)
Year over Year3Q20153Q2014% Change
Total Accounts 322 272 18%
Customer Equity (in billions)* $62.1 $54.9 13%
Cleared DARTs 620 485 28%
Total Customer DARTs 683 534 28%
Cleared Customers (in $'s, except DART per account)
Commission per DART $4.10 $4.21 -3%
DART per Avg. Account (Annualized) 493 455 8%
Net Revenue per Avg. Account (Annualized) $3,652 $3,532 3%
Consecutive Quarters3Q20152Q2015% Change
Total Accounts 322 310 4%
Customer Equity (in billions)* $62.1 $66.0 -6%
Cleared DARTs 620 565 10%
Total Customer DARTs 683 616 11%
Cleared Customers (in $'s, except DART per account)
Commission per DART $4.10 $4.31 -5%
DART per Avg. Account (Annualized) 493 469 5%
Net Revenue per Avg. Account (Annualized) $3,652 $3,749 -3%
* Excludes non-customers.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)

Three MonthsNine Months
Ended September 30,Ended September 30,
2015201420152014

(in millions)

Electronic Brokerage Net revenues (1) $300 $245 $878 $691
Non-interest expenses 116 90 455 269
Income before income taxes $184 $155 $423 $422
Pre-tax profit margin 61% 63% 48% 61%
Market Making Net revenues (1) $90 $49 $229 $231
Non-interest expenses 44 42 126 132
Income before income taxes $46 $7 $103 $99
Pre-tax profit margin 51% 14% 45% 43%
Corporate (2) Net revenues (1) ($31) ($123) ($189) ($87)
Non-interest expenses (3) (1) 6 2
Income (loss) before income taxes ($28) ($122) ($195) ($89)
Total Net revenues (1) $359 $171 $918 $835
Non-interest expenses 157 131 587 403
Income before income taxes $202 $40 $331 $432
Pre-tax profit margin 56% 23% 36% 52%
(1) To provide meaningful comparisons, all prior period amounts have been revised for the changes in presentation of currency translation classifications.
(2) Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

Three MonthsNine Months
Ended September 30,Ended September 30,
2015201420152014
(in millions, except share and per share data)
Revenues:
Trading gains (1) $87 $42 $216 $211
Commissions and execution fees 167 133 473 394
Interest income (1) 122 123 356 306
Other income (loss) (1) (1) (102) (78) (25)
Total revenues 375 196 967 886
Interest expense 16 25 49 51
Total net revenues 359 171 918 835
Non-interest expenses:
Execution and clearing 63 52 177 158
Employee compensation and benefits 56 49 171 156
Occupancy, depreciation and amortization 12 9 33 29
Communications 6 6 19 18
General and administrative 13 14 42 40
Customer bad debt 7 1 145 2
Total non-interest expenses 157 131 587 403
Income before income taxes 202 40 331 432
Income tax expense 20 9 37 39
Net income 182 31 294 393
Net income attributable to noncontrolling interests 160 28 262 356
Net income available for common stockholders $22 $3 $32 $37
Earnings per share :
Basic $0.35 $0.06 $0.53 $0.67
Diluted $0.35 $0.05 $0.52 $0.65
Weighted average common shares outstanding:
Basic 62,458,655 57,099,052 60,152,525 55,956,615
Diluted 64,028,731 58,220,070 61,646,928 57,196,113
Comprehensive income:
Net income available for common stockholders $22 $3 $32 $37
Other comprehensive income:
Cumulative translation adjustment, before income taxes (8) (11) (5) (9)
Income taxes related to items of other comprehensive income 0 0 0 0
Other comprehensive income (loss), net of tax (8) (11) (5) (9)
Comprehensive income (loss) available for common stockholders $14 ($8) $27 $28
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests $160 $28 $262 $356
Other comprehensive income - cumulative translation adjustment (44) (66) (29) (54)
Comprehensive income (loss) attributable to noncontrolling interests $116 ($38) $233 $302
(1) To provide meaningful comparisons, all prior period amounts have been revised for the changes in presentation of currency translation classifications.

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

September 30,

2015

December 31,

2014

(in millions)
Assets
Cash and cash equivalents $1,588 $1,269
Cash and securities - segregated for regulatory purposes 20,911 15,404
Securities borrowed 3,384 3,660
Securities purchased under agreements to resell 215 386
Trading assets, at fair value 3,840 3,934
Receivables from customers, net of allowance 15,879 17,051
Receivables from brokers, dealers and clearing organizations 859 1,131
Other assets 550 550
Total assets $47,226 $43,385
Liabilities and equity
Liabilities
Short-term borrowings $4 $34
Securities loaned 2,724 3,199
Trading liabilities - financial instruments sold but not yet purchased, at fair value 3,052 2,561
Other payables:
Customers 35,315 31,796
Brokers, dealers and clearing organizations 454 234
Other payables 395 377
36,164 32,407
Total liabilities 41,944 38,201
Equity
Stockholders' equity 841 766
Noncontrolling interests 4,441 4,418
Total equity 5,282 5,184
Total liabilities and equity $47,226 $43,385
September 30, 2015December 31, 2014
Ownership of IBG LLC Membership InterestsInterests%Interests%
IBG, Inc. 63,739,271 15.7% 58,473,186 14.5%
Noncontrolling interests (IBG Holdings LLC) 343,290,504 84.3% 346,062,282 85.5%
Total IBG LLC membership interests 407,029,775 100.0% 404,535,468 100.0%

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

Three MonthsNine Months
Ended September 30,Ended September 30,
2015201420152014
(in millions, except share and per share data)
Comprehensive income (loss) available for common stockholders, net of tax $14 ($8) $27 $28
Comprehensive income (loss) per share:
Basic $0.23 ($0.13) $0.45 $0.51
Diluted $0.23 ($0.13) $0.44 $0.50
Weighted average common shares outstanding:
Basic 62,458,655 57,099,052 60,152,525 55,956,615
Diluted 64,028,731 58,220,070 61,646,928 57,196,113

Contacts:

For Interactive Brokers Group, Inc.
Media: Caitlin Duffy, 203-913-1369
or
Investors:
Patrick Brennan, 203-618-4070

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