EX-99.1 2 earningsrelease_3q2016.htm 3Q2016 EARNINGS RELEASE earningsrelease_3q2016.htm
 
EXHIBIT 99.1


INTERACTIVE BROKERS GROUP ANNOUNCES 3Q2016 RESULTS

— — —

REPORTS COMPREHENSIVE EARNINGS PER SHARE OF $0.30,
INCOME BEFORE TAXES OF $183 MILLION ON $345 MILLION IN NET REVENUES,
AND EARNINGS PER SHARE ON NET INCOME OF $0.30.
DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.


GREENWICH, CONN, October 18, 2016 — 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 $0.30 for the quarter ended September 30, 2016, compared to diluted earnings per share on a comprehensive basis of $0.23 for the same period in 2015.

Excluding other comprehensive income, the Company reported diluted earnings per share of $0.30 for the quarter ended September 30, 2016, compared to diluted earnings per share of $0.35 for same period in 2015.

Net revenues were $345 million and income before income taxes was $183 million this quarter, compared to net revenues of $359 million and income before income taxes of $202 million for the same period in 2015.

The results for the quarter were positively impacted by strong growth in net interest income, which increased 28% from the same period in 2015. As compared to last summer’s unusually active trading environment, this summer’s unusually inactive trading led to lower commissions and execution fees and trading gains.

In addition, the results for the quarter include a $13 million gain on our currency diversification strategy due to the weakening of the U.S. dollar against other major currencies, compared to a $76 million loss 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 December 14, 2016 to shareholders of record as of December 1, 2016.

Business Highlights

·
56% Electronic Brokerage pretax profit margin for this quarter, down from 61% in the year-ago quarter.
·
16% Market Making pretax profit margin for this quarter, down from 51% in the year-ago quarter.
·
Customer equity grew 33% from the year-ago quarter to $82.7 billion and customer debits increased 15% to $18.1 billion.
·
Customer accounts increased 15% from the year-ago quarter to 370 thousand.
·
Total DARTs decreased 11% from the year-ago quarter to 609 thousand.
·
Brokerage segment equity was $3.9 billion. Total equity was $5.9 billion.

 
 
 

Segment Overview

Electronic Brokerage
Electronic Brokerage segment income before income taxes decreased 12%, to $162 million in the quarter ended September 30, 2016, compared to the same period last year. Net revenues decreased 4% to $288 million on lower commissions and execution fees and mark-to-market losses on our U.S. government securities portfolio, partially offset by higher net interest income.

Commission and execution fees decreased 15% from the year-ago quarter driven by lower customer volumes in options, futures, and stocks, which decreased 24%, 17%, and 5%, respectively, from the same period last year. On a comparative basis, the prior year period exhibited unusually active trading and the current year period unusually inactive trading. Other income decreased 53% from the year-ago quarter driven by mark-to-market losses on investments in U.S. government securities, while net interest income increased 28% from the year-ago quarter. Pretax profit margin was 56% in the quarter ended September 30, 2016, down from 61% in the same period last year.

Customer accounts grew 15% to 370 thousand and customer equity increased 33% to $82.7 billion from the year-ago quarter. Total DARTs1 for cleared and execution-only customers decreased 11% to 609 thousand from the year-ago quarter. Cleared DARTs were 564 thousand, 9% lower than the same period last year.

Market Making
Market Making segment income before income taxes decreased 85% to $7 million in the quarter ended September 30, 2016, compared to the same period last year, due to lower trading volumes and decreases in volatility and in the actual-to-implied volatility ratio. Pretax profit margin decreased to 16% in the quarter ended September 30, 2016 from 51% 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 15 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $13 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.26%. 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”).

 
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, October 18, 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.



For Interactive Brokers Group, Inc. Media: Caitlin Duffy, 203-913-1369 or Investors: Nancy Stuebe, 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
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
                                     
3Q2015
 
             18,696
      
       65,333
      
         5,266
      
       89,295
      
             1,395
3Q2016
 
             15,474
  
-17%
  
       61,181
  
-6%
  
         3,736
  
-29%
  
       80,391
  
-10%
  
             1,256
                                     
2Q2016
 
             16,056
      
       64,531
      
         4,114
      
       84,701
      
             1,323
3Q2016
 
             15,474
  
-4%
  
       61,181
  
-5%
  
         3,736
  
-9%
  
       80,391
  
-5%
  
             1,256

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%
                         
3Q2015
  
     179,786
      
       38,960
      
    41,999,917
    
3Q2016
  
     138,767
  
-23%
  
       32,521
  
-17%
  
    38,515,753
  
-8%
                         
2Q2016
  
     140,461
      
       35,355
      
    36,768,094
    
3Q2016
  
     138,767
  
-1%
  
       32,521
  
-8%
  
    38,515,753
  
5%
 
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%
                         
3Q2015
  
       95,754
      
         3,868
      
      4,458,343
    
3Q2016
  
       74,966
  
-22%
  
         3,338
  
-14%
  
      2,874,332
  
-36%
                         
2Q2016
  
       76,223
      
         3,042
      
      3,340,316
    
3Q2016
  
       74,966
  
-2%
  
         3,338
  
10%
  
      2,874,332
  
-14%
                         

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%
                         
3Q2015
  
       84,032
      
       35,092
      
    37,541,574
    
3Q2016
  
       63,801
  
-24%
  
       29,183
  
-17%
  
    35,641,421
  
-5%
                         
2Q2016
  
       64,238
      
       32,313
      
    33,427,778
    
3Q2016
  
       63,801
  
-1%
  
       29,183
  
-10%
  
    35,641,421
  
7%
                         
 
* 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
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%
                         
3Q2015
 
       68,018
      
       34,635
      
    36,475,917
    
3Q2016
 
       55,579
  
-18%
  
       28,986
  
-16%
  
    34,817,202
  
-5%
                         
2Q2016
 
       53,951
      
       32,037
      
    32,491,500
    
3Q2016
 
       55,579
  
3%
  
       28,986
  
-10%
  
    34,817,202
  
7%

* Includes options on futures
 
BROKERAGE STATISTICS
(in 000's, except % and where noted)
Year over Year
3Q2016
  
3Q2015
  
% Change
Total Accounts
  
                370
    
                322
  
15%
Customer Equity (in billions) *
$
82.7
  
$
62.1
  
33%
               
Cleared DARTs
  
                564
    
                620
  
-9%
Total Customer DARTs
  
                609
    
                683
  
-11%
               
Cleared Customers (in $'s, except DART per account)
              
Commission per DART
$
3.91
  
$
4.10
  
-5%
DART per Avg. Account (Annualized)
  
                390
    
                493
  
-21%
Net Revenue per Avg. Account (Annualized)**
$
3,191
  
$
3,584
  
-11%
               
Consecutive Quarters
3Q2016
  
2Q2016
  
% Change
Total Accounts
  
                370
    
                357
  
4%
Customer Equity (in billions) *
$
82.7
  
$
73.7
  
12%
               
Cleared DARTs
  
                564
    
                597
  
-6%
Total Customer DARTs
  
                609
    
                648
  
-6%
               
Cleared Customers (in $'s, except DART per account)
              
Commission per DART
$
3.91
  
$
3.91
  
0%
DART per Avg. Account (Annualized)
  
                390
    
                428
  
-9%
Net Revenue per Avg. Account (Annualized)**
$
3,191
  
$
3,256
  
-2%

* 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.
 
 

 
5
 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
 
      Three Months   Nine Months
      Ended September 30,   Ended September 30,
      2016   2015   2016   2015
      (in millions)
                           
Electronic Brokerage
Net revenues
  
$
288
  
$
300
  
$
945
  
$
878
 
Non-interest expenses
    
126
    
116
    
357
    
455
                           
 
Income before income taxes
  
$
162
  
$
184
  
$
588
  
$
423
                           
 
Pre-tax profit margin
    
56%
    
61%
    
62%
    
48%
                           
Market Making
Net revenues
  
$
43
  
$
90
  
$
145
  
$
229
 
Non-interest expenses
    
36
    
44
    
113
    
126
                           
 
Income before income taxes
  
$
7
  
$
46
  
$
32
  
$
103
                           
 
Pre-tax profit margin
    
16%
    
51%
    
22%
    
45%
                           
Corporate (1)
Net revenues
  
$
14
  
$
(31)
  
$
113
  
$
(189)
 
Non-interest expenses
    
-
    
(3)
    
-
    
6
                           
 
Income (loss) before income taxes
  
$
14
  
$
(28)
  
$
113
  
$
(195)
                           
                           
Total
Net revenues
  
$
345
  
$
359
  
$
1,203
  
$
918
 
Non-interest expenses
    
162
    
157
    
470
    
587
                           
 
Income before income taxes
  
$
183
  
$
202
  
$
733
  
$
331
                           
 
Pre-tax profit margin
    
53%
    
56%
    
61%
    
36%

(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.
 

 
6
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
        Three Months   Nine Months
        Ended September 30,   Ended September 30,
       
2016
  
2015
  
2016
  
2015
        (in millions, except share and per share data)
Revenues:
                      
 
Trading gains
$
38
  
$
87
  
$
124
  
$
216
 
Commissions and execution fees
  
144
    
167
    
462
    
473
 
Interest income
  
157
    
122
    
446
    
356
 
Other income (loss)
  
27
    
(1)
    
228
    
(78)
                             
   
Total revenues
  
366
    
375
    
1,260
    
967
                             
 
Interest expense
  
21
    
16
    
57
    
49
                             
   
Total net revenues
  
345
    
359
    
1,203
    
918
                             
Non-interest expenses:
                      
 
Execution and clearing
  
62
    
63
    
183
    
177
 
Employee compensation and benefits
  
58
    
56
    
174
    
171
 
Occupancy, depreciation and amortization
  
13
    
12
    
38
    
33
 
Communications
  
7
    
6
    
23
    
19
 
General and administrative
  
19
    
13
    
46
    
42
 
Customer bad debt
  
3
    
7
    
6
    
145
                             
   
Total non-interest expenses
  
162
    
157
    
470
    
587
                             
Income before income taxes
  
183
    
202
    
733
    
331
                             
Income tax expense
  
15
    
20
    
55
    
37
                             
Net income
  
168
    
182
    
678
    
294
                             
Net income attributable to noncontrolling interests
  
148
    
160
    
598
    
262
                             
Net income available for common stockholders
$
20
  
$
22
  
$
80
  
$
32
                             
Earnings per share:
                      
 
Basic
$
0.30
  
$
0.35
  
$
1.22
  
$
0.53
 
Diluted
$
0.30
  
$
0.35
  
$
1.20
  
$
0.52
                             
Weighted average common shares outstanding:
                      
 
Basic
  
67,083,654
    
62,458,655
    
65,351,842
    
60,152,525
 
Diluted
  
68,470,224
    
64,028,731
    
66,738,754
    
61,646,928
                             
Comprehensive income:
                      
 
Net income available for common stockholders
$
20
  
$
22
  
$
80
  
$
32
 
Other comprehensive income:
                      
   
Cumulative translation adjustment, before income taxes
  
                     -
    
(8)
    
3
    
(5)
Income taxes related to items of other comprehensive income
 
                     -
    
                     -
    
                     -
    
                     -
 
Other comprehensive income (loss), net of tax
  
                     -
    
                   (8)
    
                     3
    
                   (5)
Comprehensive income available for common stockholders
$
20
  
$
14
  
$
83
  
$
27
                             
Comprehensive income attributable to noncontrolling interests:
                    
Net income attributable to noncontrolling interests
$
148
  
$
160
  
$
598
  
$
262
Other comprehensive income (loss) - cumulative translation adjustment  
 
2
    
(44)
    
19
    
(29)
Comprehensive income attributable to noncontrolling interests
$
150
  
$
116
  
$
617
  
$
233
                             


 
7
 


INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
            September 30,
2016
 
December 31,
2015
            (in millions)
                     
Assets
                  
Cash and cash equivalents
        
$
1,550
  
$
1,601
Cash and securities - segregated for regulatory purposes
          
25,250
    
21,309
Securities borrowed
          
4,785
    
3,924
Securities purchased under agreements to resell
          
148
    
195
Financial instruments owned, at fair value
          
3,823
    
3,420
Receivables from customers, net of allowance for doubtful accounts
        
18,223
    
17,050
Receivables from brokers, dealers and clearing organizations
          
764
    
692
Other assets
          
521
    
543
                     
 
Total assets
        
$
55,064
  
$
48,734
                     
Liabilities and equity
                  
                     
Liabilities
                  
Short-term borrowings
        
$
24
  
$
-
Securities loaned
          
3,617
    
2,894
Financial instruments sold but not yet purchased, at fair value
        
2,459
    
2,617
Other payables:
                  
 
Customers
          
42,486
    
37,084
 
Brokers, dealers and clearing organizations
          
210
    
423
 
Other payables
          
398
    
372
             
43,094
    
37,879
                     
 
Total liabilities
          
49,194
    
43,390
                     
Equity
                  
Stockholders' equity
          
981
    
863
Noncontrolling interests
          
4,889
    
4,481
 
Total equity
          
5,870
    
5,344
                     
 
Total liabilities and equity
        
$
55,064
  
$
48,734
                     
                     
                     
   
September 30, 2016
    
December 31, 2015
Ownership of IBG LLC Membership Interests
Interests
  
 %
    
Interests
    
 %
                     
IBG, Inc.
67,987,957
  
16.6%
    
        63,991,705
    
15.7%
Noncontrolling interests (IBG Holdings LLC)
341,444,304
  
83.4%
    
      343,040,504
    
84.3%
                     
Total IBG LLC membership interests
      409,432,261
  
100.0%
    
      407,032,209
    
100.0%
                     
                     

 
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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)
        Three Months   Nine Months
        Ended September 30,   Ended September 30,
       
2016
  
2015
  
2016
  
2015
        (in millions, except share and per share data)
                             
Comprehensive income available for common stockholders, net of tax
$
20
  
$
14
  
$
83
  
$
27
                             
Comprehensive earnings per share:
                      
 
Basic
$
0.31
  
$
0.23
  
$
1.27
  
$
0.45
 
Diluted
$
0.30
  
$
0.23
  
$
1.25
  
$
0.44
                             
                             
Weighted average common shares outstanding:
                      
 
Basic
  
67,083,654
    
62,458,655
    
65,351,842
    
60,152,525
 
Diluted
  
68,470,224
    
64,028,731
    
66,738,754
    
61,646,928


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