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Interactive Brokers Group Announces 3Q2016 Results

Dienstag, 18.10.2016 22:05



GREENWICH, Conn. --(BUSINESS WIRE)--

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 $0.30 for the quarter ended September 30, 2016, compared to diluted earnings per share on a comprehensive basis of $0.23 for the same period in 2015.

Excluding other comprehensive income, the Company reported diluted earnings per share of $0.30 for the quarter ended September 30, 2016, compared to diluted earnings per share of $0.35 for same period in 2015.

Net revenues were $345 million and income before income taxes was $183 million this quarter, compared to net revenues of $359 million and income before income taxes of $202 million for the same period in 2015.

The results for the quarter were positively impacted by strong growth in net interest income, which increased 28% from the same period in 2015. As compared to last summer’s unusually active trading environment, this summer’s unusually inactive trading led to lower commissions and execution fees and trading gains.

In addition, the results for the quarter include a $13 million gain on our currency diversification strategy due to the weakening of the U.S. dollar against other major currencies, compared to a $76 million loss recognized in the same period in 2015.

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, 2016 to shareholders of record as of December 1, 2016.

Business Highlights

  • 56% Electronic Brokerage pretax profit margin for this quarter, down from 61% in the year-ago quarter.
  • 16% Market Making pretax profit margin for this quarter, down from 51% in the year-ago quarter.
  • Customer equity grew 33% from the year-ago quarter to $82.7 billion and customer debits increased 15% to $18.1 billion.
  • Customer accounts increased 15% from the year-ago quarter to 370 thousand.
  • Total DARTs decreased 11% from the year-ago quarter to 609 thousand.
  • Brokerage segment equity was $3.9 billion. Total equity was $5.9 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes decreased 12%, to $162 million in the quarter ended September 30, 2016, compared to the same period last year. Net revenues decreased 4% to $288 million on lower commissions and execution fees and mark-to-market losses on our U.S. government securities portfolio, partially offset by higher net interest income.

Commission and execution fees decreased 15% from the year-ago quarter driven by lower customer volumes in options, futures, and stocks, which decreased 24%, 17%, and 5%, respectively, from the same period last year. On a comparative basis, the prior year period exhibited unusually active trading and the current year period unusually inactive trading. Other income decreased 53% from the year-ago quarter driven by mark-to-market losses on investments in U.S. government securities, while net interest income increased 28% from the year-ago quarter. Pretax profit margin was 56% in the quarter ended September 30, 2016, down from 61% in the same period last year.

Customer accounts grew 15% to 370 thousand and customer equity increased 33% to $82.7 billion from the year-ago quarter. Total DARTs1 for cleared and execution-only customers decreased 11% to 609 thousand from the year-ago quarter. Cleared DARTs were 564 thousand, 9% lower than the same period last year.

Market Making

Market Making segment income before income taxes decreased 85% to $7 million in the quarter ended September 30, 2016, compared to the same period last year, due to lower trading volumes and decreases in volatility and in the actual-to-implied volatility ratio. Pretax profit margin decreased to 16% in the quarter ended September 30, 2016 from 51% in the same period last year.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 15 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $13 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.26%. 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”).

_________________________________
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 18, 2016, 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
Market Brokerage Non Avg. Trades
Making % Cleared % Cleared % Total % per U.S.

Period

Trades

Change

Trades

Change

Trades

Change

Trades

Change

Trading Day

2013 65,320 173,849 18,489 257,658 1,029
2014 64,530 -1% 206,759 19% 18,055 -2% 289,344 12% 1,155
2015 65,937 2% 242,846 17% 18,769 4% 327,553 13% 1,305
 
3Q2015 18,696 65,333 5,266 89,295 1,395
3Q2016 15,474 -17% 61,181 -6% 3,736 -29% 80,391 -10% 1,256
 
2Q2016 16,056 64,531 4,114 84,701 1,323
3Q2016 15,474 -4% 61,181 -5% 3,736 -9% 80,391 -5% 1,256
 
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
 
TOTAL Options % Futures* % Stocks %

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2013 659,673 121,776 95,479,739
2014 631,265 -4% 123,048 1% 153,613,174 61%
2015 634,388 0% 140,668 14% 172,742,520 12%
 
3Q2015 179,786 38,960 41,999,917
3Q2016 138,767 -23% 32,521 -17% 38,515,753 -8%
 
2Q2016 140,461 35,355 36,768,094
3Q2016 138,767 -1% 32,521 -8% 38,515,753 5%

 

MARKET MAKING Options % Futures* % Stocks %

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2013 404,490 18,184 12,849,729
2014 344,741 -15% 15,668 -14% 12,025,822 -6%
2015 335,406 -3% 14,975 -4% 15,376,076 28%
 
3Q2015 95,754 3,868 4,458,343
3Q2016 74,966 -22% 3,338 -14% 2,874,332 -36%
 
2Q2016 76,223 3,042 3,340,316
3Q2016 74,966 -2% 3,338 10% 2,874,332 -14%

 

BROKERAGE TOTAL Options % Futures* % Stocks %

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2013 255,183 103,592 82,630,010
2014 286,524 12% 107,380 4% 141,587,352 71%
2015 298,982 4% 125,693 17% 157,366,444 11%
 
3Q2015 84,032 35,092 37,541,574
3Q2016 63,801 -24% 29,183 -17% 35,641,421 -5%
 
2Q2016 64,238 32,313 33,427,778
3Q2016 63,801 -1% 29,183 -10% 35,641,421 7%
 
* 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

2013 180,660 101,732 78,829,785
2014 225,662 25% 106,074 4% 137,153,132 74%
2015 244,356 8% 124,206 17% 153,443,988 12%
 
3Q2015 68,018 34,635 36,475,917
3Q2016 55,579 -18% 28,986 -16% 34,817,202 -5%
 
2Q2016 53,951 32,037 32,491,500
3Q2016 55,579 3% 28,986 -10% 34,817,202 7%
 
* Includes options on futures
 
BROKERAGE STATISTICS      
(in 000's, except % and where noted)
 
Year over Year

3Q2016

3Q2015

% Change

Total Accounts 370 322 15%

Customer Equity (in billions)*

$ 82.7 $ 62.1 33%
 
Cleared DARTs 564 620 -9%
Total Customer DARTs 609 683 -11%
 
 
 
Cleared Customers (in $'s, except DART per account)
Commission per DART $ 3.91 $ 4.10 -5%
DART per Avg. Account (Annualized) 390 493 -21%
Net Revenue per Avg. Account (Annualized)** $ 3,191 $ 3,584 -11%
 
Consecutive Quarters

3Q2016

2Q2016

% Change

Total Accounts 370 357 4%

Customer Equity (in billions)*

$ 82.7 $ 73.7 12%
 
Cleared DARTs 564 597 -6%
Total Customer DARTs 609 648 -6%
 
Cleared Customers (in $'s, except DART per account)
Commission per DART $ 3.91 $ 3.91 0%
DART per Avg. Account (Annualized) 390 428 -9%
Net Revenue per Avg. Account (Annualized)** $ 3,191 $ 3,256 -2%
 
* Excludes non-customers.

** The calculation has been revised to exclude components of other income that are not direct revenues from customers. Prior period amounts have been recalculated to conform to the current methodology.

 

             
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
 
Three Months Nine Months
Ended September 30, Ended September 30,
2016 2015 2016 2015

(in millions)

 
Electronic Brokerage Net revenues $ 288 $ 300 $ 945 $ 878
Non-interest expenses   126   116   357   455
 
Income before income taxes $ 162 $ 184 $ 588 $ 423
 
Pre-tax profit margin 56% 61% 62% 48%
 
Market Making Net revenues $ 43 $ 90 $ 145 $ 229
Non-interest expenses   36   44   113   126
 
Income before income taxes $ 7 $ 46 $ 32 $ 103
 
Pre-tax profit margin 16% 51% 22% 45%
 
Corporate (1) Net revenues $ 14 $ (31) $ 113 $ (189)
Non-interest expenses   -   (3)   -   6
 
Income (loss) before income taxes $ 14 $ (28) $ 113 $ (195)
 
 
Total Net revenues $ 345 $ 359 $ 1,203 $ 918
Non-interest expenses   162   157   470   587
 
Income before income taxes $ 183 $ 202 $ 733 $ 331
 
Pre-tax profit margin 53% 56% 61% 36%
 
(1)     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 Months Nine Months
Ended September 30, Ended September 30,
2016   2015 2016   2015
(in millions, except share and per share data)
 
Revenues:
Trading gains $ 38 $ 87 $ 124 $ 216
Commissions and execution fees 144 167 462 473
Interest income 157 122 446 356
Other income (loss)     27     (1) 228     (78)
 
Total revenues 366 375 1,260 967
 
Interest expense     21     16     57     49
 
Total net revenues     345     359     1,203     918
 
Non-interest expenses:
Execution and clearing 62 63 183 177
Employee compensation and benefits 58 56 174 171
Occupancy, depreciation and amortization 13 12 38 33
Communications 7 6 23 19
General and administrative 19 13 46 42
Customer bad debt     3     7     6     145
 
Total non-interest expenses     162     157     470     587
 
Income before income taxes 183 202 733 331
 
Income tax expense     15     20     55     37
 
Net income 168 182 678 294
 
Net income attributable to noncontrolling interests     148     160     598     262
 
Net income available for common stockholders $   20 $   22 $   80 $   32
 
Earnings per share:
Basic $   0.30 $   0.35 $   1.22 $   0.53
Diluted $   0.30 $   0.35 $   1.20 $   0.52
 
Weighted average common shares outstanding:
Basic 67,083,654 62,458,655 65,351,842 60,152,525
Diluted 68,470,224 64,028,731 66,738,754 61,646,928
 
Comprehensive income:
Net income available for common stockholders $ 20 $ 22 $ 80 $ 32
Other comprehensive income:
Cumulative translation adjustment, before income taxes - (8) 3 (5)
Income taxes related to items of other comprehensive income     -     -     -     -
Other comprehensive income (loss), net of tax     -     (8)     3     (5)
Comprehensive income available for common stockholders $   20 $   14 $   83 $   27
 
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests $ 148 $ 160 $ 598 $ 262
Other comprehensive income (loss) - cumulative translation adjustment     2     (44)     19     (29)
Comprehensive income attributable to noncontrolling interests $   150 $   116 $   617 $   233
 
       
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
September 30,

2016

December 31,

2015

(in millions)
 
Assets
Cash and cash equivalents $ 1,550 $ 1,601
Cash and securities - segregated for regulatory purposes 25,250 21,309
Securities borrowed 4,785 3,924
Securities purchased under agreements to resell 148 195
Financial instruments owned, at fair value 3,823 3,420
Receivables from customers, net of allowance for doubtful accounts 18,223 17,050
Receivables from brokers, dealers and clearing organizations 764 692
Other assets   521   543
 
Total assets $ 55,064 $ 48,734
 
 
Liabilities and equity
 
Liabilities
Short-term borrowings $ 24 $ -
Securities loaned 3,617 2,894
Financial instruments sold but not yet purchased, at fair value 2,459 2,617
Other payables:
Customers 42,486 37,084
Brokers, dealers and clearing organizations 210 423
Other payables   398   372
  43,094   37,879
 
Total liabilities   49,194   43,390
 
Equity
Stockholders' equity 981 863
Noncontrolling interests   4,889   4,481
Total equity   5,870   5,344
 
Total liabilities and equity $ 55,064 $ 48,734
 
 
 
September 30, 2016 December 31, 2015
Ownership of IBG LLC Membership Interests

Interests

%

Interests

%

 
IBG, Inc. 67,987,957 16.6% 63,991,705 15.7%
Noncontrolling interests (IBG Holdings LLC) 341,444,304 83.4% 343,040,504 84.3%
 
Total IBG LLC membership interests 409,432,261 100.0% 407,032,209 100.0%
 
           
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)
 
Three Months Nine Months
Ended September 30, Ended September 30,
2016 2015 2016 2015
(in millions, except share and per share data)
 
Comprehensive income available for common stockholders, net of tax $ 20 $ 14 $ 83 $ 27
 
Comprehensive earnings per share:
Basic $ 0.31 $ 0.23 $ 1.27 $ 0.45
Diluted $ 0.30 $ 0.23 $ 1.25 $ 0.44
 
 
Weighted average common shares outstanding:
Basic 67,083,654 62,458,655 65,351,842 60,152,525
Diluted 68,470,224 64,028,731 66,738,754 61,646,928
 

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