10-QPeriod: Q2 FY2009

Interactive Brokers Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 10, 2009For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported its financial results for the quarter ended June 30, 2009. The company experienced a decline in diluted earnings per share to $0.31, down from $0.44 in the prior year's quarter, primarily driven by reduced trading gains and a significant decrease in net interest income due to the prevailing low interest rate environment. While commissions and execution fees saw a modest increase, this was not enough to offset the overall revenue decline. The market-making segment faced challenges with tighter bid/offer spreads and fluctuating volatility levels, leading to a substantial decrease in income before income taxes. Conversely, the electronic brokerage segment showed resilience, with income before income taxes increasing slightly due to higher commission revenues and lower operating expenses, despite the impact of lower interest rates on net interest income. The company maintained a strong liquidity position with substantial excess regulatory capital, reflecting its robust operational framework and focus on technology. Looking ahead, Interactive Brokers continues to focus on its automated trading platform and technology infrastructure. The company noted that while market making results can be unpredictable, the electronic brokerage segment offers more stability. IBKR remains committed to efficient operations and adapting to market conditions, including navigating competitive pressures and regulatory changes.

Financial Highlights

15 data points
Beta

Revenue

$354.88M

Net Income

$12.82M

3.6% Net Margin

EPS (Diluted)

$0.08

Cash & Equivalents

$863.77M

Free Cash Flow

$379.44M

Financial Statements
Beta
Revenue$354.88M
Net Income$12.82M
EPS (Basic)$0.08
EPS (Diluted)$0.08
Shares Outstanding (Basic)163.67M
Shares Outstanding (Diluted)167.03M

Key Highlights

  • 1Diluted EPS decreased to $0.31 for Q2 2009 from $0.44 in Q2 2008, reflecting challenging market conditions.
  • 2Total net revenues declined by 16% year-over-year to $332.1 million, primarily due to a 16% decrease in trading gains and a 59% drop in net interest income.
  • 3The market-making segment's income before taxes decreased by 30% year-over-year, impacted by tighter bid/offer spreads and volatility.
  • 4The electronic brokerage segment saw a 5% increase in income before taxes, driven by higher commissions and lower expenses, partially offset by reduced net interest income.
  • 5Customer accounts grew by 18% year-over-year, reaching approximately 122,000 by June 30, 2009.
  • 6The company maintained strong liquidity, with total assets of $26.44 billion, of which approximately 98% were considered liquid.
  • 7Excess regulatory capital across operating companies stood at $3.12 billion as of June 30, 2009, indicating a solid capital position.

Frequently Asked Questions

The decrease in EPS was primarily driven by lower trading gains and a significant reduction in net interest income. Trading gains fell due to tighter bid/offer spreads and fluctuating market volatility, particularly impacting the market-making segment. Net interest income decreased substantially because of the prevailing low interest rate environment, which compressed yields on customer balances and investments.

The market-making segment experienced a 30% decrease in income before taxes, negatively affected by compressed spreads and market volatility. In contrast, the electronic brokerage segment showed resilience, with a 5% increase in income before taxes. This growth was supported by higher commission revenues and improved operational efficiencies (lower expenses), although it was partially offset by the impact of lower interest rates on net interest income.

Interactive Brokers maintained a strong liquidity and capital position. Total assets stood at $26.44 billion, with approximately 98% considered liquid. The company reported substantial excess regulatory capital of $3.12 billion across its operating entities, indicating a well-capitalized financial structure.

Management highlighted that market maker profitability is influenced by trading volume, market share, bid/offer spreads, and volatility. For electronic brokerage, profitability is more stable and depends on customer activity, account growth, interest rates, and operational efficiency. The company also noted the impact of low interest rates on its net interest income.