IBKR Interactive Brokers Group Inc

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.

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.

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.

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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.

 

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    

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) 1Q2015 1Q2014 % Change Year over Year 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.  

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.

   

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.

         

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%    

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

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