Interactive Brokers Group Announces 2012 Results

Reports Comprehensive Earnings Per Share of $0.92, Income before Taxes of $527 Million on $1,131 Million in Net Revenues, and Earnings Per Share on Net Income of $0.89

Declares Quarterly Dividend of $0.10 Per Share

GREENWICH, Conn.--()--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 $0.92 for the year ended December 31, 2012, compared to diluted earnings per share on a comprehensive basis of $1.31 for 2011.

Reported results on a comprehensive basis reflect the GAAP convention adopted in 2011 that requires the reporting of currency translation results contained in Other Comprehensive Income as part of reportable earnings.

On a non-comprehensive basis, which excludes the effect of changes in the U.S. dollar value of the Company’s non-U.S. subsidiaries, the Company reported diluted earnings per share on net income of $0.89 for the year ended December 31, 2012, compared to diluted earnings per share on net income of $1.37 for 2011.

Net revenues were $1,131 million and income before income taxes was $527 million for the year, compared to net revenues of $1,358 million and income before income taxes of $741 million for 2011.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 14, 2013 to shareholders of record as of March 1, 2013.

Business Highlights

  • 47% pretax profit margin for 2012.
  • 51% Electronic Brokerage pretax profit margin for 2012.
  • 41% Market Making pretax profit margin for 2012.
  • Customer equity grew 31% from 2011 to $32.9 billion and customer accounts increased 11%.
  • Cleared DARTs decreased 6% from 2011 to 384,000.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes decreased 8%, to $342 million, in 2012. Customer accounts grew 11% from the prior year and customer equity increased 31% during 2012. Commissions and execution fees decreased 10%, consistent with the subdued trading environment. Net interest income grew 9% from the prior year. Pretax profit margin was 51% in 2012, down from 54% in 2011. Total DARTs(1) for cleared and execution-only customers decreased 7% to 413,000 in 2012, compared to 444,000 during 2011. Cleared DARTs were 384,000 in 2012, 6% lower than in 2011.

Market Making

Market Making segment income before income taxes decreased 54%, to $189 million, in 2012. This decrease was driven by lower exchange volumes, lower actual-to-implied volatility and a swing in currency translation gains. In 2012, our currency diversification strategy negatively impacted the income statement by $39 million, compared to an $11 million gain in 2011. Including balance sheet effects, our currency strategy resulted in a slightly smaller loss than last year. Currency translation effects are reported as part of Trading Gains in the Market Making segment. Pretax profit margin decreased to 41% in 2012 from 59% in 2011. Market Making options contract volume decreased 9% in 2012.

Effects of Foreign Currency Diversification

As a global broker and market maker trading on exchanges around the world and transacting in multiple currencies, we are exposed to fluctuations in foreign exchange rates. We actively manage this exposure by maintaining our net worth in GLOBALs, a basket of 16 currencies in which we hold our equity. In 2012, this currency strategy decreased our profits, as measured in U.S. dollars, as the U.S. dollar value of the GLOBAL decreased by approximately 0.4%. The effects of our currency strategy are reported as components of (1) Market Making Trading Gains and (2) Other Comprehensive Income, described below.

Comprehensive Income

Reported results on a comprehensive basis reflect the Company’s adoption of U.S. GAAP guidance (2) issued in June 2011 that requires the presentation of a Statement of Comprehensive Income, replacing the former Statement of Income. The Statement of Comprehensive Income reports currency translation results that are a component of Other Comprehensive Income (“OCI”) directly in this statement. Previously, OCI was reported as a component of changes in Total Equity in the Statement of Financial Condition.

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

(2) Accounting Standards Update 2011-05, Comprehensive Income.

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, January 15, 2013, 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

2008 101,672 120,195 16,966 238,833

944

2009 93,550 -8 % 127,338 6 % 13,636 -20 % 234,524 -2 %

934

2010 75,169 -20 % 133,658 5 % 18,732 37 % 227,559 -3 %

905

2011 63,602 -15 % 160,567 20 % 19,187 2 % 243,356 7 %

968

2012 60,421 -5 % 150,000 -7 % 16,118 -16 % 226,540 -7 %

904

 

4Q2011 15,093 39,554 5,432 60,079

961

4Q2012 14,477 -4 % 37,300 -6 % 3,532 -35 % 55,309 -8 %

878

 
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
 
TOTAL Options % Futures* % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change
2008 757,732 108,984 55,845,428
2009 643,380 -15 % 82,345 -24 % 75,449,891 35 %
2010 678,856 6 % 96,193 17 % 84,469,874 12 %
2011 789,370 16 % 106,640 11 % 77,730,974 -8 %
2012 698,140 -12 % 98,801 -7 % 65,872,960 -15 %
 
4Q2011 203,566 26,655 16,012,605
4Q2012 159,048 -22 % 25,591 -4 % 17,278,459 8 %
 
MARKET MAKING Options % Futures* % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change
2008 ** 514,629 21,544 26,008,433
2009 ** 428,810 -17 % 15,122 -30 % 26,205,229 1 %
2010 ** 435,184 1 % 15,371 2 % 19,165,000 -27 %
2011 ** 503,053 16 % 15,519 1 % 11,788,769 -38 %
2012 ** 457,384 -9 % 12,660 -18 % 9,339,465 -21 %
 
4Q2011 ** 135,559 3,672 2,687,537
4Q2012 ** 102,703 -24 % 3,203 -13 % 2,361,442 -12 %
 
BROKERAGE TOTAL Options % Futures* % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change
2008 243,103 87,440 29,836,995
2009 214,570 -12 % 67,223 -23 % 49,244,662 65 %
2010 243,672 14 % 80,822 20 % 65,304,874 33 %
2011 286,317 18 % 91,121 13 % 65,942,205 1 %
2012 240,756 -16 % 86,141 -5 % 56,533,495 -14 %
 
4Q2011 68,007 22,983 13,325,068
4Q2012 56,345 -17 % 22,388 -3 % 14,917,017 12 %

*

 

Includes options on futures

**

In Brazil, an equity option contract typically represents 1 share of the underlying stock; however, the typical minimum trading quantity is 100 contracts. To make a fair comparison to volume at other exchanges, we have adopted a policy of reporting Brazilian equity options contracts divided by their trading quantity of 100.

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

           
BROKERAGE CLEARED Options % Futures* % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change
2008 77,207 85,599 26,334,752
2009 93,868 22 % 66,241 -23 % 46,627,344 77 %
2010 103,054 10 % 79,144 19 % 62,077,741 33 %
2011 145,993 42 % 89,610 13 % 63,098,072 2 %
2012 144,539 -1 % 84,794 -5 % 54,371,351 -14 %
 
4Q2011 32,960 22,587 12,556,217
4Q2012 36,602 11 % 21,952 -3 % 14,348,785 14 %
 
* Includes options on futures
BROKERAGE STATISTICS      
(in 000's, except % and where noted)
4Q2012 4Q2011 % Change
Total Accounts 210 189 11 %
Customer Equity (in billions) * $32.9 $25.1 31 %
 
Cleared DARTs 378 412 -8 %
Total Customer DARTs 407 447 -9 %
 
 
Cleared Customers (in $'s, except DART per account)
Commission per DART $4.24 $4.07 4 %
DART per Avg. Account (Annualized) 457 556 -18 %
Net Revenue per Avg. Account (Annualized) $3,233 $3,435 -6 %
 
* Excludes non-customers
 

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

         
Three Months Twelve Months
Ended December 31, Ended December 31,
2012 2011 2012 2011

(in millions)

 
Electronic Brokerage Net revenues $172.1 $166.4 $670.4 $691.5
Non-interest expenses 84.8   80.7   328.7   321.2  
 
Income (loss) before income taxes $87.3   $85.7   $341.7   $370.3  
 
Pre-tax profit margin 51 % 52 % 51 % 54 %
 
Market Making Net revenues $71.8 $166.1 $459.6 $698.5
Non-interest expenses 63.4   75.3   271.0   285.3  
 
Income (loss) before income taxes $8.4   $90.8   $188.6   $413.2  
 
Pre-tax profit margin 12 % 55 % 41 % 59 %
 
Corporate* Net revenues $3.2 ($24.6 ) $0.5 ($31.7 )
Non-interest expenses 2.7   (0.3 ) 3.8   10.7  
 
Income (loss) before income taxes $0.5   ($24.3 ) ($3.3 ) ($42.4 )
 
 
Total Net revenues $247.1 $307.9 $1,130.5 $1,358.3
Non-interest expenses 150.9   155.7   603.5   617.2  
 
Income (loss) before income taxes $96.2   $152.2   $527.0   $741.1  
 
Pre-tax profit margin 39 % 49 % 47 % 55 %
 
* 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 Twelve Months
Ended December 31, Ended December 31,
2012   2011 2012   2011
(in millions, except share and per share data)
 
Revenues:
Trading gains $63.1 $150.5 $435.1 $665.2
Commissions and execution fees 103.1 109.9 412.6 456.2
Interest income 67.8 68.4 268.4 280.2
Other income 25.6   (0.1 ) 76.4 43.0  
 
Total revenues 259.6 328.7 1,192.5 1,444.6
 
Interest expense 12.5   20.8   62.0 86.3  
 
Total net revenues 247.1   307.9   1,130.5 1,358.3  
 
Non-interest expenses:
Execution and clearing 58.5 66.9 251.0 281.3
Employee compensation and benefits 64.3 55.1 244.5 216.3
Occupancy, depreciation and amortization 9.9 9.8 38.8 37.1
Communications 6.1 5.8 23.3 23.6
General and administrative 12.1   18.1   45.9 58.9  
 
Total non-interest expenses 150.9   155.7   603.5 617.2  
 
Income before income taxes 96.2 152.2 527.0 741.1
 
Income tax expense (4.4 ) 7.4   30.0 53.9  
 
Net income 100.6 144.8 497.0 687.2
 
Net income attributable to noncontrolling interests 91.5   131.2   456.3 625.3  
 
Net income (loss) attributable to common stockholders $9.1   $13.6   $40.7 $61.9  
 
 
Earnings (loss) per share :
Basic $0.19   $0.29   $0.89 $1.39  
Diluted $0.19   $0.29   $0.89 $1.37  
 
Weighted average common shares outstanding:
Basic 47,489,141 45,569,269 46,814,676 43,924,554
Diluted 47,680,329 45,944,562 47,070,522 44,364,902
 
Comprehensive income:
Net income (loss) attributable to common stockholders $9.1 $13.6 $40.7 $61.9
Other comprehensive income:
Cumulative translation adjustment, before income taxes 0.9 (2.4 ) 2.2 (4.5 )
Income taxes related to items of other comprehensive income 0.3   (1.0 ) 0.8 (1.8 )
Other comprehensive income (loss), net of tax 0.6   (1.4 ) 1.4 (2.7 )
Comprehensive income (loss) attributable to common stockholders $9.7   $12.2   $42.1 $59.2  
 
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests 91.5 $131.2 $456.3 $625.3
Other comprehensive income (loss) - cumulative translation adjustment 7.1   (18.6 ) 17.0 (27.8 )
Comprehensive income attributable to noncontrolling interests $98.6   $112.6   $473.3 $597.5  
 

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

     
December 31, 2012 December 31, 2011
(in millions)
 
Assets
Cash and cash equivalents $1,614.6 $1,695.5
Cash and securities - segregated for regulatory purposes 12,482.4 10,069.9
Securities purchased under agreements to resell 428.9 375.4
Securities borrowed 2,837.3 2,661.7
Trading assets, at fair value 4,518.3 6,615.1
Receivables from customers, net of allowance 9,851.0 7,024.8
Receivables from brokers, dealers and clearing organizations 872.3 1,397.8
Other assets 596.1 564.2  
 
Total assets $33,200.9 $30,404.4  
 
Liabilities and equity
 
Liabilities
Trading liabilities - financial instruments sold but not yet purchased, at fair value $4,286.3 $6,156.1
Securities loaned 1,840.6 1,386.1
Short-term borrowings 110.4 6.5
Other payables:
Customers 21,422.0 17,300.1
Brokers, dealers and clearing organizations 361.8 247.4
Other payables 376.5 394.9  
22,160.3 17,942.4  
 
Senior notes payable and senior secured credit facility 0.0 101.4
 

Redeemable noncontrolling interests

0.0 5,269.6
 
Equity
Stockholders' equity 588.7 (457.7 )
Noncontrolling interests 4,214.6 0.0  
Total equity 4,803.3 (457.7 )
 
Total liabilities and equity $33,200.9 $30,404.4  
 

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

           
Three Months Twelve Months
Ended December 31, Ended December 31,
2012 2011 2012 2011
(in millions, except share and per share data)
 
 
Net income (loss) attributable to common stockholders $9.1 $13.6 $40.7 $61.9
Add (deduct) net income attributable to non-fair value redemption rights 0.0 (0.4 ) 1.1 (0.9 )
 
Net income (loss) available for common stockholders $9.1 $13.2 $41.8 $61.0
 
Other comprehensive income:
Cumulative translation adjustment, before income taxes 0.9 (2.4 ) 2.2 (4.5 )
Income taxes related to items of other comprehensive income 0.3 (1.0 ) 0.8 (1.8 )
Other comprehensive income (loss), net of tax 0.6 (1.4 ) 1.4 (2.7 )
 
Comprehensive income (loss) available for common stockholders $9.7 $11.8   $43.2 $58.3  
 
 
Comprehensive income (loss) per share:
Basic $0.20 $0.26   $0.92 $1.33  
Diluted $0.20 $0.26   $0.92 $1.31  
 
 
Weighted average common shares outstanding:
Basic 47,489,141 45,569,269 46,814,676 43,924,554
Diluted 47,680,329 45,944,562 47,070,522 44,364,902

Contacts

Interactive Brokers Group, Inc.
Media:
Caitlin Duffy, 203-913-1369
or
Investors:
Deborah Liston, 203-618-4070

Sharing

Contacts

Interactive Brokers Group, Inc.
Media:
Caitlin Duffy, 203-913-1369
or
Investors:
Deborah Liston, 203-618-4070