IBKR Interactive Brokers Group Inc

Reports Comprehensive Earnings Per Share of $0.36, Income before Taxes of $213 Million on $369 Million in Net Revenues, and Earnings Per Share on Net Income of $0.40

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 $0.36 for the quarter ended June 30, 2016, compared to diluted earnings per share on a comprehensive basis of $0.44 for the same period in 2015.

Excluding other comprehensive income, the Company reported diluted earnings per share of $0.40 for the quarter ended June 30, 2016, compared to diluted earnings per share of $0.37 for same period in 2015.

Net revenues were $369 million and income before income taxes was $213 million this quarter, compared to net revenues of $387 million and income before income taxes of $240 million for the same period in 2015.

The results for the quarter were positively impacted by strong growth in net interest income, which increased 17% from the same period in 2015.

In addition, the results for the quarter include a $2 million loss on our currency diversification strategy due to the strengthening of the U.S. dollar against other major currencies, compared to a $53 million gain 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 September 14, 2016 to shareholders of record as of September 1, 2016.

Business Highlights

• 62% Electronic Brokerage pretax profit margin for this quarter, down from 65% in the year-ago quarter.
• 12% Market Making pretax profit margin for this quarter, down from 42% in the year-ago quarter.
• Customer equity grew 12% from the year-ago quarter to $73.7 billion while customer debits decreased by 21% to $15.0 billion.
• Customer accounts increased 15% from the year-ago quarter to 357 thousand.
• Total DARTs increased 5% from the year-ago quarter to 648 thousand.
• Brokerage segment equity was $3.8 billion. Total equity was $5.7 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes increased 2%, to $191 million in the quarter ended June 30, 2016, compared to the same period last year. Net revenues increased 8% to $310 million on higher net interest income and marked-to-market gains on our U.S. government securities portfolio.

Net interest income increased 11% from the year-ago quarter and other income grew 56% over the same period driven higher by marked-to-market gains on investments of customer funds. Commission and execution fees decreased 3% from the year-ago quarter driven by lower customer option contracts and stock shares volume, which decreased 8% and 40%, respectively, from the same period last year. Pretax profit margin was 62% in the quarter ended June 30, 2016, down from 65% in the same period last year.

Customer accounts grew 15% to 357 thousand and customer equity increased 12% to $73.7 billion from the year-ago quarter. Total DARTs1 for cleared and execution-only customers increased 5% to 648 thousand from the year-ago quarter. Cleared DARTs were 597 thousand, 6% higher than the same period last year.

Market Making

Market Making segment income before income taxes decreased 83% to $5 million in the quarter ended June 30, 2016, compared to the same period last year, on mixed trading volumes despite modest increases in volatility and in the actual-to-implied volatility ratio. Pretax profit margin decreased to 12% in the current quarter from 42% 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 16 major currencies in which we hold our equity. In this quarter, our currency diversification strategy decreased our comprehensive earnings by $2 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.03%. 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 a result of a periodic assessment, and in light of the increasing importance of China to our business, we added the Chinese renminbi (CNH), removed the South Korean won (KRW) and Brazilian real (BRL) components, and realigned the relative weights of the U.S. dollar (USD) and Japanese yen (JPY) components to better reflect the global diversification of our businesses.

The new composition contains 15 currencies, one fewer than the prior composition. The new composition was effective as of the close of business on June 30, 2016 and the conversion to the new targeted currency holdings took place shortly thereafter. The detailed component changes were disclosed with the June Monthly Brokerage Metrics on July 1, 2016. A copy of that press release is available through the Investor Relations section of the Interactive Brokers website, www.interactivebrokers.com/ir.

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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, July 19, 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   2Q2015 14,852 58,458 4,060 77,370 1,228 2Q2016 16,056 8% 64,531 10% 4,114 1% 84,701 9% 1,323   1Q2016 17,255 71,145 4,731 93,131 1,527 2Q2016 16,056 -7% 64,531 -9% 4,114 -13% 84,701 -9% 1,323   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%   2Q2015 144,188 34,661 60,255,458 2Q2016 140,461 -3% 35,355 2% 36,768,094 -39%   1Q2016 151,912 41,238 38,350,112 2Q2016 140,461 -8% 35,355 -14% 36,768,094 -4%

 

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%   2Q2015 74,533 3,652 4,270,738 2Q2016 76,223 2% 3,042 -17% 3,340,316 -22%   1Q2016 82,345 4,344 4,618,495 2Q2016 76,223 -7% 3,042 -30% 3,340,316 -28%   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%   2Q2015 69,655 31,009 55,984,720 2Q2016 64,238 -8% 32,313 4% 33,427,778 -40%   1Q2016 69,567 36,894 33,731,617 2Q2016 64,238 -8% 32,313 -12% 33,427,778 -1%   * 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%   2Q2015 57,867 30,717 55,144,248 2Q2016 53,951 -7% 32,037 4% 32,491,500 -41%   1Q2016 58,531 36,546 32,617,117 2Q2016 53,951 -8% 32,037 -12% 32,491,500 0%   * Includes options on futures         BROKERAGE STATISTICS (in 000's, except % and where noted)   Year over Year 2Q2016 2Q2015 % Change Total Accounts 357 310 15% Customer Equity (in billions) * $ 73.7 $ 66.0 12%   Cleared DARTs 597 565 6% Total Customer DARTs 648 616 5%   Cleared Customers (in $'s, except DART per account) Commission per DART $ 3.91 $ 4.31 -9% DART per Avg. Account (Annualized) 428 469 -9% Net Revenue per Avg. Account (Annualized)** $ 3,256 $ 3,747 -13%   Consecutive Quarters 2Q2016 1Q2016 % Change Total Accounts 357 345 3% Customer Equity (in billions) * $ 73.7 $ 70.1 5%   Cleared DARTs 597 688 -13% Total Customer DARTs 648 748 -13%   Cleared Customers (in $'s, except DART per account) Commission per DART $ 3.91 $ 3.86 1% DART per Avg. Account (Annualized) 428 513 -17% Net Revenue per Avg. Account (Annualized)** $ 3,256 $ 3,709 -12%   * 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 Six Months Ended June 30, Ended June 30, 2016 2015 2016 2015

(in millions)

  Electronic Brokerage Net revenues $ 310 $ 288 $ 657 $ 578 Non-interest expenses   119   100   231   339   Income before income taxes $ 191 $ 188 $ 426 $ 239   Pre-tax profit margin 62% 65% 65% 41%   Market Making Net revenues $ 43 $ 72 $ 102 $ 139 Non-interest expenses   38   42   77   82   Income before income taxes $ 5 $ 30 $ 25 $ 57   Pre-tax profit margin 12% 42% 25% 41%   Corporate (1) Net revenues $ 16 $ 27 $ 99 $ (158) Non-interest expenses   (1)   5   0   9   Income (loss) before income taxes $ 17 $ 22 $ 99 $ (167)     Total Net revenues $ 369 $ 387 $ 858 $ 559 Non-interest expenses   156   147   308   430   Income before income taxes $ 213 $ 240 $ 550 $ 129   Pre-tax profit margin

58%

62% 64% 23% (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 Six Months Ended June 30, Ended June 30, 2016   2015 2016 2015 (in millions, except share and per share data)   Revenues: Trading gains $ 34 $ 67 $ 86 $ 129 Commissions and execution fees 152 157 318 306 Interest income 144 126 289 234 Other income (loss)   57     55     201   (77 )   Total revenues 387 405 894 592   Interest expense   18     18     36   33     Total net revenues   369     387     858   559     Non-interest expenses: Execution and clearing 59 59 121 114 Employee compensation and benefits 58 58 116 115 Occupancy, depreciation and amortization 13 11 25 21 Communications 9 7 16 13 General and administrative 14 13 27 29 Customer bad debt   3     (1 )   3   138     Total non-interest expenses   156     147     308   430     Income before income taxes 213 240 550 129   Income tax expense   13     19     40   17     Net income 200 221 510 112   Net income attributable to noncontrolling interests   173     198     450   102     Net income available for common stockholders $ 27   $ 23   $ 60 $ 10     Earnings per share: Basic $ 0.41   $ 0.38   $ 0.93 $ 0.17   Diluted $ 0.40   $ 0.37   $ 0.91 $ 0.17     Weighted average common shares outstanding: Basic 64,967,364 59,481,778 64,476,421 58,980,348 Diluted 66,470,913 61,038,926 65,863,408 60,436,914   Comprehensive income: Net income available for common stockholders $ 27 $ 23 $ 60 $ 10 Other comprehensive income: Cumulative translation adjustment, before income taxes (3 ) 4 3 3 Income taxes related to items of other comprehensive income   0     0     0   0   Other comprehensive income (loss), net of tax   (3 )   4     3   3   Comprehensive income available for common stockholders $ 24   $ 27   $ 63 $ 13     Comprehensive income attributable to noncontrolling interests: Net income attributable to noncontrolling interests $ 173 $ 198 $ 450 $ 102 Other comprehensive income (loss) - cumulative translation adjustment   (16 )   24     17   15   Comprehensive income attributable to noncontrolling interests $ 157   $ 222   $ 467 $ 117             INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)   June 30,

2016

December 31,

2015

(in millions)   Assets Cash and cash equivalents $ 1,507 $ 1,601 Cash and securities - segregated for regulatory purposes 25,257 21,309 Securities borrowed 3,760 3,924 Securities purchased under agreements to resell 113 195 Trading assets, at fair value 4,254 3,420 Receivables from customers, net of allowance 15,137 17,050 Receivables from brokers, dealers and clearing organizations 1,287 692 Other assets   512   543  

Total assets

$ 51,827 $ 48,734     Liabilities and equity   Liabilities Short-term borrowings $ 8 $ 0 Securities loaned 3,270 2,894 Trading liabilities - financial instruments sold but not yet purchased, at fair value 2,874 2,617 Other payables:

Customers

39,319 37,084

Brokers, dealers and clearing organizations

286 423

Other payables

  378   372   39,983   37,879  

Total liabilities

  46,135   43,390   Equity Stockholders' equity 915 863 Noncontrolling interests   4,777   4,481

Total equity

  5,692   5,344  

Total liabilities and equity

$ 51,827 $ 48,734       June 30, 2016 December 31, 2015 Ownership of IBG LLC Membership Interests

Interests

%

Interests

%

  IBG, Inc. 66,386,915 16.2% 63,991,705 15.7% Noncontrolling interests (IBG Holdings LLC) 343,040,504 83.8% 343,040,504 84.3%   Total IBG LLC membership interests 409,427,419 100.0% 407,032,209 100.0%           INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES EARNINGS PER SHARE ON COMPREHENSIVE INCOME (UNAUDITED)   Three Months Six Months Ended June 30, Ended June 30, 2016   2015 2016 2015 (in millions, except share and per share data)   Comprehensive income available for common stockholders, net of tax $ 24 $ 27 $ 63 $ 13   Comprehensive earnings per share: Basic $ 0.36 $ 0.45 $ 0.97 $ 0.22 Diluted $ 0.36 $ 0.44 $ 0.95 $ 0.21     Weighted average common shares outstanding: Basic 64,967,364 59,481,778 64,476,421 58,980,348

Diluted

66,470,913 61,038,926 65,863,408 60,436,914  

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