10-QPeriod: Q1 FY2011

Interactive Brokers Group, Inc. Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 6, 2011For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported strong financial results for the first quarter ended March 31, 2011. Diluted earnings per share surged by 322% to $0.38 compared to $0.09 in the prior year's quarter. This significant improvement was driven by a substantial increase in net revenues, which grew by 75% to $367.9 million, largely due to a 149% jump in trading gains and a 19% increase in commissions and execution fees. Income before income taxes more than tripled, reaching $222.0 million, reflecting improved profitability in both the market making and electronic brokerage segments. The company's robust performance was supported by a more favorable market environment characterized by wider bid/offer spreads and increased customer trading activity.

Financial Highlights

27 data points
Beta

Revenue

$385.63M

Net Income

$16.25M

4.2% Net Margin

EPS (Diluted)

$0.10

Total Assets

$30.05B

Cash & Equivalents

$1.18B

Free Cash Flow

-$36.74M

Financial Statements
Beta
Revenue$385.63M
Net Income$16.25M
EPS (Basic)$0.10
EPS (Diluted)$0.10
Shares Outstanding (Basic)168.93M
Shares Outstanding (Diluted)171.17M

Key Highlights

  • 1Diluted EPS increased significantly to $0.38 from $0.09 year-over-year.
  • 2Total net revenues grew 75% to $367.9 million.
  • 3Trading gains rose by 149% to $200.3 million, driven by wider bid/offer spreads and improved volatility.
  • 4Commissions and execution fees increased by 19% due to higher customer trading volumes.
  • 5Income before taxes more than tripled to $222.0 million, indicating strong operational leverage.
  • 6Market making segment pre-tax profit margin improved dramatically to 67% from 7% year-over-year.
  • 7Electronic brokerage segment saw a 40% increase in income before taxes, with customer accounts and equity growing substantially.

Frequently Asked Questions

The primary driver for the significant increase in diluted earnings per share from $0.09 in Q1 2010 to $0.38 in Q1 2011 was a substantial improvement in trading gains, which rose by 149% due to wider bid/offer spreads in options and a more favorable volatility environment. Additionally, increased customer trading activity boosted commission revenue.

Both business segments showed strong performance. The market making segment saw a dramatic increase in income before taxes, with its pre-tax profit margin improving to 67% from 7% year-over-year, driven by wider spreads and currency translation gains. The electronic brokerage segment also experienced robust growth, with income before taxes increasing by 40% due to higher net interest income and commissions, supported by a 20% increase in customer accounts and a 49% increase in customer equity.

The company maintained a highly liquid balance sheet. As of March 31, 2011, total assets were $30.05 billion, with approximately 98% considered liquid, primarily consisting of marketable securities, customer segregated cash and collateralized receivables. The company reported aggregate excess regulatory capital of $2.80 billion across its operating subsidiaries.

Interactive Brokers actively manages its global currency exposure by maintaining its net worth in proportion to a basket of major currencies called the GLOBAL. This strategy aims to mitigate the impact of foreign exchange rate fluctuations on its earnings and net worth, with approximately half of its equity denominated in currencies other than the U.S. dollar. The weakening of the U.S. dollar during the quarter had a positive impact on market making earnings due to currency translation gains.