10-QPeriod: Q3 FY2009

Interactive Brokers Group, Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 9, 2009For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported its third-quarter 2009 financial results, indicating a significant year-over-year decline in profitability. Diluted EPS fell to $0.20 from $0.65 in the prior year's comparable quarter. This was driven by a substantial decrease in net revenues, primarily due to lower trading gains which were down 57% year-over-year, reflecting tighter bid/offer spreads and lower volatility in market making activities. While the electronic brokerage segment showed more resilience with a slight decrease in income before taxes, its net interest income was also impacted by the low interest rate environment. Despite the challenging quarter, the company's financial condition remained strong, with total assets at $28.85 billion and significant excess regulatory capital of $3.07 billion. The company's liquidity position was robust, supported by substantial cash and collateralized receivables. IBKR continued to grow its customer accounts, which increased by 20% year-over-year, signaling underlying demand for its services despite the difficult trading environment.

Financial Highlights

15 data points
Beta

Revenue

$286.67M

Net Income

$8.41M

2.9% Net Margin

EPS (Diluted)

$0.05

Cash & Equivalents

$859.93M

Free Cash Flow

-$99.29M

Financial Statements
Beta
Revenue$286.67M
Net Income$8.41M
EPS (Basic)$0.05
EPS (Diluted)$0.05
Shares Outstanding (Basic)164.86M
Shares Outstanding (Diluted)167.89M

Key Highlights

  • 1Diluted EPS decreased significantly to $0.20 in Q3 2009 from $0.65 in Q3 2008, a 69% decline.
  • 2Total net revenues for Q3 2009 were $271.5 million, down 45% from $497.1 million in Q3 2008, primarily due to a 57% drop in trading gains.
  • 3The market-making segment's income before taxes decreased by 74% year-over-year, impacted by tighter spreads and lower volatility.
  • 4The electronic brokerage segment saw a 3% decrease in income before taxes, with lower commissions offset by reduced expenses, though net interest income was down.
  • 5Customer accounts grew by 20% year-over-year, reaching approximately 128,000, and customer equity increased by 43% to $13.4 billion.
  • 6The company maintained a strong financial position with $28.85 billion in total assets and $3.07 billion in excess regulatory capital.
  • 7Interest income decreased significantly due to the prevailing low interest rate environment.

Frequently Asked Questions

The primary driver for the significant decrease in net income was a substantial drop in trading gains, down 57% year-over-year. This was largely attributable to tighter bid/offer spreads in market-making activities and less favorable volatility conditions, particularly impacting the market-making segment.

The low interest rate environment significantly impacted Interactive Brokers' net interest income. For the third quarter of 2009, net interest income decreased by 51% compared to the prior year, as the company earned less on customer cash balances and other interest-earning assets. This effect was pronounced in both the market-making and electronic brokerage segments.

Yes, the electronic brokerage segment showed resilience and signs of underlying growth. While overall income before taxes slightly decreased, customer accounts grew by 20% year-over-year to approximately 128,000, and customer equity surged by 43% to $13.4 billion. This indicates continued client engagement and asset growth on the platform.

Interactive Brokers maintained a strong liquidity and capital position. Total assets stood at $28.85 billion, with a significant portion considered liquid. The company reported $3.07 billion in excess regulatory capital, indicating a strong buffer against potential market volatility and operational needs.