Interactive Brokers Group Announces 2014 Results

Reports Comprehensive Earnings Per Share of $0.51, Income before Taxes of $506 Million on $1,043 Million in Net Revenues, and Earnings Per Share on Net Income of $0.77.

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 $0.51 for the year ended December 31, 2014, compared to diluted earnings per share on a comprehensive basis of $0.67 for 2013.

Excluding 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 $0.77 for the year ended December 31, 2014, compared to diluted earnings per share of $0.73 for the same period in 2013.

Net revenues were $1,043 million and income before income taxes was $506 million for the year, compared to net revenues of $1,076 million and income before income taxes of $451 million for 2013.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 13, 2015 to shareholders of record as of February 27, 2015.

Business Highlights

  • 49% pretax profit margin for 2014.
  • 62% Electronic Brokerage pretax profit margin for 2014.
  • 40% Market Making pretax profit margin for 2014.
  • Customer equity grew 24% from 2013 to $56.7 billion.
  • Customer accounts increased 18% in 2014 to 281 thousand.
  • Total DARTs increased 16% from 2013 to 566 thousand.
  • Brokerage segment equity was $3.0 billion. Total equity was $5.2 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes grew 49%, to $589 million, in 2014. Customer accounts grew 18% from the prior year and customer equity increased 24% during 2014. Commissions and execution fees increased 9%. Net interest income grew 44% from the prior year, to $333 million. Pretax profit margin was 62% in 2014, up from 48% in 2013. Excluding $64.3 million in expense related to an unusual item, pretax profit margin was 56% in 2013.

Total DARTs(1), for cleared and execution-only customers, increased 16% to 566 thousand in 2014, compared to 486 thousand during 2013. Cleared DARTs were 515 thousand in 2014, 17% higher than in 2013.

Market Making

Market Making segment income before income taxes decreased 28%, to $115 million, in 2014. This decrease was driven by a market making environment with persistent low volatility and intensive competition. Pretax profit margin decreased to 40% in 2014 from 44% in 2013. Market Making options contract volume decreased 15% in 2014.

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 2014, our currency diversification program decreased our comprehensive earnings by $293 million, as the U.S. dollar value of the GLOBAL decreased by approximately 6.0%. The effects of currency diversification 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

The Company has taken several steps to improve the transparency of its 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.

_______________________________

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, January 20, 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
 
4Q2013 14,437 45,167 4,585 64,189 1,019
4Q2014 16,126 12% 57,773 28% 4,621 1% 78,520 22% 1,246
 
3Q2014 17,864 49,636 4,282 71,782 1,130
4Q2014 16,126 -10% 57,773 16% 4,621 8% 78,520 9% 1,246
 
         
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%
 
4Q2013 155,216 28,724 27,042,356
4Q2014 173,284 12% 34,259 19% 36,973,639 37%
 
3Q2014 151,768 29,352 36,040,255
4Q2014 173,284 14% 34,259 17% 36,973,639 3%
 
 
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%
 
4Q2013 87,498 4,245 2,776,564
4Q2014 95,625 9% 3,462 -18% 3,093,170 11%
 
3Q2014 81,395 3,542 3,137,329
4Q2014 95,625 17% 3,462 -2% 3,093,170 -1%
 
 
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%
 
4Q2013 67,718 24,479 24,265,792
4Q2014 77,659 15% 30,797 26% 33,880,469 40%
 
3Q2014 70,373 25,810 32,902,926
4Q2014 77,659 10% 30,797 19% 33,880,469 3%
 
* 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%
 
4Q2013 49,181 24,020 23,208,208
4Q2014 63,739 30% 30,559 27% 32,720,100 41%
 
3Q2014 56,824 25,559 31,814,664
4Q2014 63,739 12% 30,559 20% 32,720,100 3%
 
* Includes options on futures
 
     
BROKERAGE STATISTICS
(in 000's, except % and where noted)
 

Year over Year

4Q2014

4Q2013

% Change

Total Accounts 281 239 18%
Customer Equity (in billions)* $56.7 $45.7 24%
 
Cleared DARTs 564 453 25%
Total Customer DARTs 619 499 24%
 
 
Cleared Customers (in $'s, except DART per account)
Commission per DART $4.28 $4.23 1%
DART per Avg. Account (Annualized) 511 483 6%
Net Revenue per Avg. Account (Annualized) $3,700 $3,375 10%
 
 
Consecutive Quarters

4Q2014

3Q2014

% Change

Total Accounts 281 272 3%
Customer Equity (in billions)* $56.7 $54.9 3%
 
Cleared DARTs 564 485 16%
Total Customer DARTs 619 534 16%
 
 
Cleared Customers (in $'s, except DART per account)
Commission per DART $4.28 $4.21 2%
DART per Avg. Account (Annualized) 511 455 12%
Net Revenue per Avg. Account (Annualized) $3,700 $3,532 5%
 
* Excludes non-customers.
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED)

 
         
Three Months Twelve Months
Ended December 31, Ended December 31,
2014 2013 2014 2013

(in millions)

 
Electronic Brokerage Net revenues (1) $261.5 $212.1 $952.3 $818.8
Non-interest expenses 94.6 162.9 363.8 422.7
 
Income before income taxes $166.9 $49.2 $588.5 $396.1
 
Pre-tax profit margin 64% 23% 62% 48%
 
Market Making Net revenues(1) $53.6 $76.2 $284.8 $362.1
Non-interest expenses 38.5 46.8 170.3 202.6
 
Income before income taxes $15.1 $29.4 $114.5 $159.5
 
Pre-tax profit margin 28% 39% 40% 44%
 
Corporate(2) Net revenues(1) ($107.0) ($38.3) ($193.7) ($104.7)
Non-interest expenses 0.7 1.4 3.1 (0.4)
 
Loss before income taxes ($107.7) ($39.7) ($196.8) ($104.3)
 
 
Total Net revenues(1) $208.1 $249.9 $1,043.3 $1,076.2
Non-interest expenses 133.8 211.1 537.2 624.9
 
Income before income taxes $74.3 $38.8 $506.1 $451.3
 
Pre-tax profit margin 36% 16% 49% 42%
 

(1) To provide meaningful comparisons, 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   Twelve Months
Ended December 31, Ended December 31,
2014     2013   2014     2013  
(in millions, except share and per share data)
 
Revenues:
Trading gains(1) $50.5 $67.3 $261.5 $331.9
Commissions and execution fees 155.2 124.1 548.8 502.1
Interest income(1) 121.3 79.9 426.9 303.7
Other income (loss)(1) (97.0 ) (8.3 ) (121.6 ) (9.8 )
 
Total revenues 229.9 262.9 1,115.5 1,127.9
 
Interest expense 21.8   13.0   72.2   51.7  
 
Total net revenues 208.1   249.9   1,043.3   1,076.2  
 
Non-interest expenses:
Execution and clearing 53.5 62.2 211.5 242.5
Employee compensation and benefits 48.3 56.7 204.8 205.3
Occupancy, depreciation and amortization 10.5 10.3 39.4 38.9
Communications 6.0 5.7 24.2 23.1
General and administrative 15.5   76.2   57.3   115.1  
 
Total non-interest expenses 133.8   211.1   537.2   624.9  
 
Income before income taxes 74.3 38.8 506.1 451.3
 
Income tax expense 9.1   2.5   47.3   33.7  
 
Net income 65.2 36.3 458.8 417.6
 
Net income attributable to noncontrolling interests 58.1   32.7   414.3   380.6  
 
Net income available for common stockholders $7.1   $3.6   $44.5   $37.0  
 

Earnings per share:

Basic $0.12   $0.07   $0.79   $0.74  
Diluted $0.12   $0.07   $0.77   $0.73  
 
Weighted average common shares outstanding:
Basic 58,124,119 52,517,259 56,492,381 49,742,428
Diluted 59,274,773 53,729,140 57,709,668 50,924,736
 
Comprehensive income:
Net income available for common stockholders $7.1 $3.6 $44.5 $37.0
Other comprehensive income:
Cumulative translation adjustment, before income taxes (6.3 ) 0.8 (15.3 ) (3.2 )
Income taxes related to items of other comprehensive income (0.2 ) (0.2 ) (0.3 ) (0.5 )
Other comprehensive income (loss), net of tax (6.1 ) 1.0   (15.0 ) (2.7 )
Comprehensive income available for common stockholders $1.0   $4.6   $29.5   $34.3  
 
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests $58.1 $32.7 $414.3 $380.6
Other comprehensive income (loss) - cumulative translation adjustment (37.5 ) 4.9   (92.0 ) (24.7 )
Comprehensive income attributable to noncontrolling interests $20.6   $37.6   $322.3   $355.9  

(1) To provide meaningful comparisons, 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)

     
 
December 31,

2014

  December 31,

2013

(in millions)
 
Assets
Cash and cash equivalents $1,269.3 $1,213.2
Cash and securities - segregated for regulatory purposes 15,403.5 13,991.7

Securities borrowed

3,659.8

2,751.5

Securities purchased under agreements to resell 386.2 386.3
Trading assets, at fair value

3,934.1

4,448.8

Receivables from customers, net of allowance 17,051.5 13,596.7
Receivables from brokers, dealers and clearing organizations 1,131.2 858.2
Other assets 549.4 624.3
 
Total assets $43,385.0 $37,870.7
 
Liabilities and equity
 
Liabilities
Trading liabilities - financial instruments sold but not yet purchased, at fair value $2,560.8 $3,153.7
Securities loaned 3,199.1 2,563.7
Short-term borrowings 33.8 24.6
Other payables:
Customers 31,797.4 26,319.4
Brokers, dealers and clearing organizations 234.1 331.0
Other payables 375.2 386.2
32,406.7 27,036.6
 
Equity
Stockholders' equity 766.3 707.3
Noncontrolling interests 4,418.3 4,384.8
Total equity 5,184.6 5,092.1
 
Total liabilities and equity $43,385.0 $37,870.7
 
 
December 31, 2014 December 31, 2013
Ownership of IBG LLC Membership Interests

Interests

%

Interests

%

 
Public (IBG, Inc.) 58,473,286 14.5% 54,663,604 13.6%
Noncontrolling interests (IBG Holdings LLC) 346,062,282 85.5% 347,648,001 86.4%
 
Total IBG LLC membership interests 404,535,568 100.0% 402,311,605 100.0%
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

EARNINGS PER SHARE ON COMPREHENSIVE INCOME

(UNAUDITED)

       
Three Months Twelve Months
Ended December 31, Ended December 31,
2014 2013 2014 2013

(in millions, except share and per share data)

 
 
Comprehensive income available for common stockholders, net of tax $1.0 $4.6 $29.5 $34.3
 
Comprehensive income per share:
Basic $0.02 $0.09 $0.52 $0.69
Diluted $0.02 $0.09 $0.51 $0.67
 
 
Weighted average common shares outstanding:
Basic 58,124,119 52,517,259 56,492,381 49,742,428
Diluted 59,274,773 53,729,140 57,709,668 50,924,736

Contacts

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

Contacts

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