UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
 
Securities Exchange Act of 1934
 
 
Date of Report (Date of Earliest Event Reported):  April 21, 2015
 
INTERACTIVE BROKERS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
001-33440
30-0390693
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(I.R.S. Employer Identification Number)
     
One Pickwick Plaza, Greenwich, CT 06830
(Address of Principal Executive Offices) (Zip Code)
 
(203) 618-5800
(Registrant’s Telephone Number, Including Area Code)
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
  o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 
 

 

Item 2.02. Results of Operations and Financial Condition.

On April 21, 2015, the Registrant issued a press release reporting its financial results for the first quarter ended March 31, 2015.  A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated herein by reference.

All of the information furnished in this report (including Exhibit 99.1 hereto) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and unless expressly set forth by specific reference in such filings, shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings.

 
Item 8.02. Other Events.

On April 21, 2015, Interactive Brokers Group, Inc. (the “Company”) declared a quarterly cash dividend of $0.10 per share on the Company’s common stock.  The Company’s Board of Directors has declared that the dividend will be paid on June 12, 2015 to shareholders of record as of June 1, 2015.
 
 
Item 9.01. Financial Statements and Exhibits.
 
(d)
Exhibits.
99.1
Press Release dated April 21, 2015.

 

 
 

 


 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: April 21, 2015
 
 
INTERACTIVE BROKERS GROUP, INC.
     
     
 
By:
/s/ Paul J. Brody 
 
Name:
Paul J. Brody
 
Title:
Chief Financial Officer, Treasurer
and Secretary


 
 

 

EXHIBIT INDEX

99.1
Press Release dated April 21, 2015.


























 
EXHIBIT 99.1

INTERACTIVE BROKERS GROUP ANNOUNCES 1Q2015 RESULTS

— — —

REPORTS COMPREHENSIVE EARNINGS PER SHARE OF ($0.24),
LOSS BEFORE TAXES OF $111 MILLION ON $172 MILLION IN NET REVENUES,
AND EARNINGS PER SHARE ON NET LOSS OF ($0.22).
DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.


GREENWICH, CONN, April 21, 2015 — 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 ($0.24) for the quarter ended March 31, 2015, compared to diluted earnings per share on a comprehensive basis of $0.35 for the same period in 2014.

Excluding other comprehensive income, the Company reported diluted earnings per share of ($0.22) for the quarter ended March 31, 2015, compared to diluted earnings per share of $0.34 for the same period in 2014.

The results for the first quarter of 2015 were negatively impacted by a $121 million net loss due to the sudden move in the value of the Swiss franc, causing several of our customers who held currency futures and spot positions to suffer losses in excess of their deposits with us; and a $197 million loss on our currency diversification strategy due to the strengthening of the U.S. dollar against other major currencies.

Net revenues were $172 million and the loss before income taxes was $111 million this quarter, compared to net revenues of $355 million and income before income taxes of $218 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 June 12, 2015 to shareholders of record as of June 1, 2015.


Business Highlights

18% Electronic Brokerage pretax profit margin for this quarter, or 63% excluding the negative impact of the sudden move in the value of the Swiss franc.
40% Market Making pretax profit margin for this quarter, down from 59% in the year-ago quarter.
Customer equity grew 25% from the year-ago quarter to $61.2 billion and customer debits increased by 20% to $17.3 billion.
Customer accounts increased 17% from the year-ago quarter to 296 thousand.
Total DARTs increased 11% from year-ago quarter to 648 thousand.
Brokerage segment equity was $3.1 billion. Total equity was $5.0 billion.



 
1

 

Segment Overview

Electronic Brokerage
Electronic Brokerage segment income before income taxes decreased 62%, to $51 million, in the quarter ended March 31, 2015 compared to the same period last year, due to unsecured customer losses caused by the sudden move in the value of the Swiss franc as further described below.  Excluding the impact of this unusual item segment income before taxes grew 27% to a record $172 million as compared to the year-ago quarter.  Customer accounts grew 17% to 296 thousand and customer equity increased 25% to $61.2 billion from the year-ago quarter.

Commissions and execution fees increased 9%.  Net interest income grew 35% from the year-ago quarter, to $89 million.  Pretax profit margin was 18% in quarter ended March 31, 2015, down from 60% in same period last year.  Excluding $121 million in net losses related to the unusual item, pretax profit margin was 63% in the current quarter.

Total DARTs(1), for cleared and execution-only customers, increased 11% to a record 648 thousand from the year-ago quarter.  Cleared DARTs were 590 thousand, 12% higher than the same period last year.

Market Making
Market Making segment income before income taxes decreased 59%, to $27 million, in the quarter ended March 31, 2015.  This decrease was driven by a market making environment with persistent low volatility and intensive competition.  Pretax profit margin decreased to 40% in the current quarter from 59% in same period last year.  Market Making options contract volume decreased 7% compared to the year-ago quarter.

Sudden Move in the Value of the Swiss Franc
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, on January 15, 2015, due to the sudden move in the value of the Swiss franc that followed an unprecedented action by the Swiss National Bank, several of our customers who held currency futures and spot positions suffered losses in excess of their deposits with us. We took immediate action to hedge our exposure to the foreign currency receivables from these customers. During the first quarter of 2015, we incurred losses, net of hedging activity, of $121 million. We are actively pursuing collection of these debts. The ultimate effect of this incident on our results will depend upon the outcome of our debt collection efforts.

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 $197 million, as the U.S. dollar value of the GLOBAL decreased by approximately 3.8%.  The effects of the currency diversification strategy are reported as components of (1) Other Income in the Corporate segment (described below) and (2) Other Comprehensive Income (“OCI”).

Presentation of Foreign Currency Effects
In the fourth quarter of 2014, we took several steps to improve the transparency of our currency strategy, as a result of which nearly all currency translation gains and losses related to the GLOBAL are reported as Other Income instead of Trading Gains and these gains and losses are reported in the Corporate segment instead of the Market Making segment.

These actions isolate the income statement effects of our currency diversification in the Corporate segment, thereby leaving a clearer picture of the core operating results in the Market Making segment. The new reporting method is also reflected in the comparative historical periods contained in our financial statements.

 (1)           Daily average revenue trades (DARTs) are based on customer orders.
_____________________

 
2

 
 
Conference Call Information:
Interactive Brokers Group will hold a conference call with investors today, April 21, 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.

For Interactive Brokers Group, Inc. Media: Caitlin Duffy, 203-913-1369 or Investors: Patrick Brennan, 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
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
                                     
1Q2014
 
            15,643
     
       50,727
     
         4,862
     
       71,232
     
            1,168
1Q2015
 
            15,404
 
-2%
 
       58,208
 
15%
 
         4,581
 
-6%
 
       78,193
 
10%
 
            1,282
                                     
4Q2014
 
            16,126
     
       57,773
     
         4,621
     
       78,520
     
            1,246
1Q2015
 
            15,404
 
-4%
 
       58,208
 
1%
 
         4,581
 
-1%
 
       78,193
 
0%
 
            1,282

CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
 
TOTAL
   
Options
 
%
 
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%
                         
1Q2014
 
     161,578
     
       30,661
     
     44,707,956
   
1Q2015
 
     154,289
 
-5%
 
       33,612
 
10%
 
     35,336,325
 
-21%
                         
4Q2014
 
     173,284
     
       34,259
     
     36,973,639
   
1Q2015
 
     154,289
 
-11%
 
       33,612
 
-2%
 
     35,336,325
 
-4%

MARKET MAKING
   
Options
 
%
 
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%
                         
1Q2014
 
       89,079
     
         4,575
     
       2,958,853
   
1Q2015
 
       83,013
 
-7%
 
         3,408
 
-26%
 
       2,969,719
 
0%
                         
4Q2014
 
       95,625
     
         3,462
     
       3,093,170
   
1Q2015
 
       83,013
 
-13%
 
         3,408
 
-2%
 
       2,969,719
 
-4%

BROKERAGE TOTAL
   
Options
 
%
 
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%
                         
1Q2014
 
       72,499
     
       26,086
     
     41,749,103
   
1Q2015
 
       71,276
 
-2%
 
       30,204
 
16%
 
     32,366,606
 
-22%
                         
4Q2014
 
       77,659
     
       30,797
     
     33,880,469
   
1Q2015
 
       71,276
 
-8%
 
       30,204
 
-2%
 
     32,366,606
 
-4%

* Includes options on futures

 
4

 

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

BROKERAGE CLEARED
   
Options
 
%
 
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%
                         
1Q2014
 
       54,367
     
       25,694
     
     40,576,558
   
1Q2015
 
       58,537
 
8%
 
       29,824
 
16%
 
     31,418,644
 
-23%
                         
4Q2014
 
       63,739
     
       30,559
     
     32,720,100
   
1Q2015
 
       58,537
 
-8%
 
       29,824
 
-2%
 
     31,418,644
 
-4%

* Includes options on futures
 
 
BROKERAGE STATISTICS
(in 000's, except % and where noted)
 
 Year over Year  
1Q2015
   
1Q2014
 
% Change
   Total Accounts
 
                                296
   
                                252
 
17%
   Customer Equity (in billions)*
$
                               61.2
 
$
                               49.0
 
25%
               
   Cleared DARTs
 
                                590
   
                                527
 
12%
   Total Customer DARTs
 
                                648
   
                                582
 
11%
               
Cleared Customers (in $'s, except DART per account)
             
   Commission per DART
$
                               4.05
 
$
                               4.14
 
-2%
   DART per Avg. Account (Annualized)
 
                                513
   
                                539
 
-5%
   Net Revenue per Avg. Account (Annualized)
$
                             4,079
 
 $
                             3,661
 
11%
               
               
Consecutive Quarters
 
1Q2015
   
4Q2014
 
% Change
   Total Accounts
 
                                296
   
                                281
 
5%
   Customer Equity (in billions)*
$
                               61.2
 
$
                               56.7
 
8%
               
   Cleared DARTs
 
                                590
   
                                564
 
5%
   Total Customer DARTs
 
                                648
   
                                619
 
5%
               
Cleared Customers (in $'s, except DART per account)
             
   Commission per DART
$
                               4.05
 
 $
                               4.28
 
-5%
   DART per Avg. Account (Annualized)
 
                                513
   
                                511
 
0%
   Net Revenue per Avg. Account (Annualized)
$
                             4,079
 
 $
                             3,700
 
10%
 
* Excludes non-customers.

 
 
5

 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
 
       
Three Months
       
 Ended March 31,
       
2015
   
2014
     
  (in millions)
               
Electronic Brokerage
Net revenues(1)
 
$
290
 
$
224
 
Non-interest expenses
   
239
   
89
               
 
Income before income taxes
 
$
51
 
$
$135
               
 
Pre-tax profit margin
   
18%
   
60%
               
Market Making
Net revenues(1)
 
$
67
 
$
111
 
Non-interest expenses
   
40
   
45
               
 
Income before income taxes
 
$
27
 
$
$66
               
 
Pre-tax profit margin
   
40%
   
59%
               
Corporate(2)
Net revenues(1)
 
$
(185)
 
$
20
 
Non-interest expenses
   
4
   
3
               
 
Income (loss) before income taxes
 
$
(189)
 
$
$17
               
               
Total
Net revenues(1)
 
$
172
 
$
355
 
Non-interest expenses
   
283
   
137
               
 
Income (loss) before income taxes
 
$
(111)
 
$
$218
               
 
Pre-tax profit margin
   
-65%
   
61%

(1)  To provide meaningful comparisons, all prior period amounts have been revised for changes in the presentation of currency translation classifications.
(2)  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
           Ended March 31,
          2015     2014
         
(in millions, except share and per share data)
                 
Revenues:
           
 
Trading gains  (1)
 
$
62
 
$
105
 
Commissions and execution fees
   
149
   
137
 
Interest income (1)
   
108
   
87
 
Other income (loss) (1)
   
(132)
   
40
                 
   
Total revenues
   
187
   
369
                 
 
Interest expense
   
15
   
14
                 
   
Total net revenues
   
172
   
355
                 
Non-interest expenses:
           
 
Execution and clearing
   
55
   
54
 
Employee compensation and benefits
   
57
   
54
 
Occupancy, depreciation and amortization
   
10
   
10
 
Communications
   
6
   
6
 
General and administrative
   
155
   
13
                 
   
Total non-interest expenses
   
283
   
137
                 
Income (loss) before income taxes
   
(111)
   
218
                 
Income tax expense
   
(2)
   
17
                 
Net income (loss)
   
(109)
   
201
                 
Net income (loss) attributable to noncontrolling interests
   
(96)
   
182
                 
Net income (loss) available for common stockholders
 
$
(13)
 
$
19
                 
                 
Earnings (loss) per share :
           
 
Basic
 
$
(0.22)
 
$
0.35
 
Diluted
 
$
(0.22)
 
$
0.34
                 
Weighted average common shares outstanding:
           
 
Basic
   
58,473,348
   
54,664,225
 
Diluted
   
58,473,348
   
56,041,282
                 
Comprehensive income:
           
 
Net income (loss) available for common stockholders
 
$
(13)
 
$
19
 
Other comprehensive income:
           
   
Cumulative translation adjustment, before income taxes
   
(1)
   
0
   
Income taxes related to items of other comprehensive income
   
0
   
0
 
Other comprehensive income (loss), net of tax
   
(1)
   
0
Comprehensive income (loss) available for common stockholders
 
$
(14)
 
$
19
                 
Comprehensive income attributable to noncontrolling interests:
           
Net income (loss) attributable to noncontrolling interests
 
$
(96)
 
$
182
Other comprehensive income (loss) - cumulative translation adjustment
 
(9)
   
3
Comprehensive income (loss) attributable to noncontrolling interests
 
$
(105)
 
$
185
 
(1)  To provide meaningful comparisons, all prior period amounts have been revised for changes in the presentation of currency translation classifications.
 
 
7

 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
           
  March 31,
 2015
 
  December 31,
 2014
              (in millions)
                     
Assets
                 
Cash and cash equivalents
       
$
990
 
$
1,269
Cash and securities - segregated for regulatory purposes
         
16,723
   
15,404
Securities borrowed
         
2,925
   
3,660
Securities purchased under agreements to resell
         
167
   
386
Trading assets, at fair value
         
3,473
   
3,934
Receivables from customers, net of allowance
         
17,437
   
17,051
Receivables from brokers, dealers and clearing organizations
         
1,015
   
1,131
Other assets
         
564
   
550
                     
 
Total assets
       
$
43,294
 
$
43,385
                     
Liabilities and equity
                 
                     
Liabilities
                 
Short-term borrowings
       
$
29
 
$
34
Securities loaned
         
3,105
   
3,199
Trading liabilities - financial instruments sold but not yet purchased, at fair value
       
2,238
   
2,561
Other payables:
                 
 
Customers
         
32,225
   
31,796
 
Brokers, dealers and clearing organizations
         
291
   
234
 
Other payables
         
368
   
376
             
32,884
   
32,406
                     
Equity
                 
Stockholders' equity
         
748
   
766
Noncontrolling interests
         
4,290
   
4,419
 
Total equity
         
                 5,038
   
                 5,185
                     
 
Total liabilities and equity
       
$
43,294
 
$
43,385
                     
                     
                     
   
March 31, 2015
   
December 31, 2014
Ownership of IBG LLC Membership Interests
Interests
 
 %
   
Interests
   
 %
                     
Public (IBG, Inc.)
         58,478,751
 
14.5%
   
         58,473,186
   
14.5%
Noncontrolling interests (IBG Holdings LLC)
        346,062,282
 
85.5%
   
        346,062,282
   
85.5%
                     
 
Total IBG LLC membership interests
        404,541,033
 
100.0%
   
        404,535,468
   
100.0%
                     

 
8

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)
 
      Three Months
     Ended March 31,
      2015     2014
     
(in millions, except share and per share data)
             
Comprehensive income (loss) available for common stockholders, net of tax
$
(14)
 
$
19
             
Comprehensive income (loss) per share:
         
 
Basic
$
(0.24)
 
$
0.36
 
Diluted
$
(0.24)
 
$
0.35
             
             
Weighted average common shares outstanding:
         
 
Basic
 
58,473,348
   
54,664,225
 
Diluted
 
58,473,348
   
56,041,282
             





 
9

 

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